Saturday 25 November 2017

Einzelhandel Forex Transaktionen Definition


RELEASE: pr5883-10 CFTC veröffentlicht endgültige Regeln für Retail-Devisengeschäfte Washington, D. C. Die US-Commodity-Futures-Handelskommission (CFTC) gab heute die Veröffentlichung im Bundesregister der endgültigen Regulierungen für Devisenhandel Devisengeschäfte bekannt. Die Bestimmungen enthalten die Bestimmungen des Dodd-Frank Wall Street Reform - und Verbraucherschutzgesetzes sowie des Food and Conservation and Energy Act von 2008, die gemeinsam dem CFTC eine breite Zuständigkeit für die Registrierung und Regulierung von Unternehmen bieten, die als Gegenparteien für, Oder auf Zwischen-, Einzelhandel Devisen (Forex) Transaktionen. Diese Regeln der Straße wird dazu beitragen, die amerikanische Öffentlichkeit in den größten Bereich der Retail-Betrug, dass die CFTC überwacht: Einzelhandel Devisen, sagte CFTC-Vorsitzender Gary Gensler. Alle CFTC-Registranten, die an der Beschaffung und dem Verkauf von Retail-Devisenverträgen an Verbraucher beteiligt sind, müssen nun Regeln für den Schutz der investierenden Öffentlichkeit einhalten. Dies ist auch die erste endgültige Regel, die die Kommission zur Umsetzung des Dodd-Frank-Wall Street-Reform - und Verbraucherschutzgesetzes veröffentlicht hat. Wir freuen uns darauf, zusätzliche Regeln zum Schutz der amerikanischen Öffentlichkeit zu veröffentlichen. Die endgültigen Forex-Regeln setzen Anforderungen an, unter anderem für die Registrierung, Offenlegung, Aufbewahrung, Finanzberichterstattung, Mindestkapital und andere Geschäftsbedingungen und operative Standards. Die Bestimmungen erfordern insbesondere die Registrierung von Kontrahenten, die Devisenterminkontrakte anbieten, sowohl als Futures-Commission-Händler (FCMs) oder als Retail Devisenhändler (RFEDs), als neue Registrant-Kategorie. Personen, die Aufträge erteilen, ausüben, handelsrechtliche Befugnisse ausüben oder Pools in Bezug auf Einzelhandelsgeschäfte betreiben, sind ebenfalls verpflichtet, sich entweder als Makler, Rohstoffhandelsberater, Rohstoffhandelsbetreiber (nach Bedarf) oder als assoziierte Personen solcher Unternehmen zu registrieren. Andernfalls können regulierte Einheiten wie US-amerikanische Finanzinstitute und SEC-registrierte Broker oder Händler weiterhin als Kontrahenten bei solchen Transaktionen unter Aufsicht ihrer primären Regulierungsbehörden dienen. Die endgültigen Regeln umfassen finanzielle Anforderungen, um die finanzielle Integrität der Unternehmen, die sich im Einzelhandel Forex-Transaktionen und robuste Kunden schützen. Zum Beispiel sind FCMs und RFEDs erforderlich, um Nettokapital von 20 Millionen plus 5 Prozent der Menge, wenn überhaupt, durch die Verbindlichkeiten zu Retail-Forex-Kunden über 10 Millionen zu halten. Leverage im Einzelhandel Forex-Kunden-Konten unterliegen einer Kaution Anforderung von der National Futures Association in Grenzen von der Kommission zur Verfügung gestellt werden. Alle Einzelhandelsforex-Kontrahenten und Intermediäre sind verpflichtet, forexpezifische Offenlegungserklärungen an Kunden weiterzugeben und umfassende Anforderungen an die Archivierung und Berichterstattung zu erfüllen. Die endgültigen Regeln treten am 18. Oktober 2010 in Kraft. Medienkontakte R. David Gary 202-418-5085 Letzte Aktualisierung: 30. August 2010 CFTCs Engagement für Open Government Medienkontakte im Amt für Presse - und Öffentlichkeitsarbeit Pressemitteilung E-Mail-AbonnementsEinzelhandel Devisengeschäfte (Verordnung NN ) Enhanced Content - Dokument-Tools Diese Tools sollen Ihnen helfen, das offizielle Dokument besser zu verstehen und den Vergleich der Online-Ausgabe mit der Print-Ausgabe zu erleichtern. Diese Markup-Elemente ermöglichen dem Benutzer zu sehen, wie das Dokument folgt dem Dokument Drafting Handbook, die Agenturen verwenden, um ihre Dokumente zu erstellen. Diese können nützlich sein, um besser zu verstehen, wie ein Dokument strukturiert ist, aber nicht Teil des veröffentlichten Dokuments selbst sind. Enhanced Content - Dokumentenwerkzeuge Enhanced Content - Entwicklertools Der Board of Governors des Federal Reserve Systems (ldquoBoardrdquo) erlässt eine endgültige Regel, um Bankenorganisationen, die unter ihrer Aufsicht stehen, zu erlauben, Devisentransaktionen im Einzelhandel zu tätigen Kunden. Die abschließende Regel beschreibt auch verschiedene Anforderungen, mit denen Bankenorganisationen einhalten müssen, um solche Transaktionen durchzuführen. Diese Regel gilt ab 13. Mai 2013. Beginn Weitere Informationen WEITERE INFORMATIONEN KONTAKT: Scott Holz, Senior Counsel, Juristische Abteilung, (202) 452-2966. Ende Weitere Informationen Ende Preamble Start Zusätzliche Informationen ZUSÄTZLICHE INFORMATIONEN: I. Hintergrund Am 21. Juli 2010 unterzeichnete Präsident Obama das Dodd-Frank Wall Street Reform - und Verbraucherschutzgesetz von 2010 (Dodd-Frank Gesetz). 1 In der Fassung des § 742 (c) (2) des Dodd-Frank-Gesetzes 2 sieht das Commodity Exchange Act (CEA) vor, dass ein US-Finanzinstitut, für das es eine Bundesregulierungsbehörde gibt, Angebot, bestimmte Arten von Devisengeschäften, die in Abschnitt 2 Buchstabe c Ziffer 2 Buchstabe b Ziffer i Ziffer I des CEA beschrieben sind, mit einem Einzelhandelsgeschäft anzupassen, außer in Übereinstimmung mit einer Vorschrift oder Verordnung einer Bundesaufsichtsbehörde So dass die Transaktion unter den Bedingungen und Bedingungen wie die Federal Regulatory Agency vorgeschriebenen 6 (ein ldquoretail forex rulerdquo). Abschnitt 2 (c) (2) (B) (i) (I) umfasst ldquoan Vereinbarung, Vertrag oder Transaktion in Fremdwährung, die ein Kaufvertrag für eine zukünftige Lieferung ist (oder eine Option auf einen solchen Vertrag) oder Eine Option (mit Ausnahme einer Option, die an einer nationalen Wertpapierbörse gehandelt oder gehandelt wird, die gemäß § 6 (a) des Securities Exchange Act von 1934 (15 USC 78 f (a)) registriert ist.) Rdquothinsp 7 A Federal regulatory agencys Einzelhandel Forex Regel muss 8 Retail-Forex-Regeln müssen angemessene Anforderungen in Bezug auf Offenlegung, Aufbewahrung, Kapital und Marge, Berichterstattung, geschäftliche Verhaltensweisen vorschreiben. Diese Bestimmungen gelten für alle Futures und Optionen sowie für alle Geschäfte, die mit diesen Futures und Optionen funktionell oder wirtschaftlich vergleichbar sind Und die Anforderungen an die Dokumentation und können auch andere Normen oder Anforderungen enthalten, die von der Bundesregulierungsbehörde als notwendig erachtet werden.9 Die Boards-Regel gilt für ldquobanking Institute, rdquo einen Begriff, der in Abschnitt 240.2 (b) definiert wird, um staatliche Mitgliedsbanken, nicht versicherten Staat zu bedeuten Lizenzierte Zweigniederlassungen von ausländischen Banken, Finanzholdinggesellschaften, Bankholdinggesellschaften, Spar - und Darlehensholdinggesellschaften, 10 Vereinbarungsunternehmen und Edge Act Gesellschaften. Am 10. September 2010 verabschiedete die Commodity Futures Trading Commission (CFTC) eine Retail Forex-Regel für Personen, die ihrer Rechtshoheit unterliegen. 11 Nach dem Studium und der Prüfung der CFTCs Retail Forex-Regel und der Konsultation mit dem Office of the Comptroller of the Currency (OCC) und der Federal Deposit Insurance Corporation (FDIC) genehmigte der Vorstand eine Bekanntmachung über die vorgeschlagene Regulierung (NPR) für den Einzelhandel Forex-Transaktionen von Bankinstituten am 28. Juli 2011. Die NPR wurde am 3. August 2011 im Federal Register veröffentlicht und am 11. Oktober 2011 geschlossen. Als Reaktion auf die NPR erhielt der Board sechs Kommentare: Drei von Einzelpersonen, eine von einer Bank und zwei von Berufsverbänden. Einer der einzelnen Kommentatoren reagierte nicht auf die Regel, während ein anderer einzelner Kommentator allgemeine Unterstützung für die Regel ausdrückte. Die dritte Person (im Folgenden ldquote individuellen Commenterrdquo) und die Bank (im Folgenden ldquote Bank Commenterrdquo) in der Regel unterstützt die Regel, während die Anfrage bestimmte Klarstellungen und Änderungen. Ein Verband forderte Änderungen an, um die Belastung für bestimmte Unternehmen zu reduzieren, die als ldquoretail forex customersrdquo im Rahmen der vorgeschlagenen Verordnung qualifizieren würden. Das andere Handelsvereinbarungsschreiben forderte Änderungen an, um Einzelhandelskunden zu adressieren, die Devisen im Zusammenhang mit dem Kauf oder Verkauf eines Wertpapiers verwenden, das auf eine Fremdwährung lautet. Diese Kommentare werden in der nachstehenden Abschnitt-nach-Abschnitt-Analyse behandelt. Der Verwaltungsrat erlässt eine endgültige Regelung, die im Wesentlichen dieselbe wie die vorgeschlagene Regelung ist, mit bestimmten Klarstellungen, wie nachstehend erörtert. II. Abschnitt-für-Abschnitt-Analyse Abschnitt 240.1mdashAutorität, Zweck und Anwendungsbereich Dieser Abschnitt berechtigt eine Bankinstitut, Einzelhandels-Devisentransaktionen durchzuführen. Der Geltungsbereich der Verordnung erstreckt sich auf Zweigniederlassungen und Büros von Bankinstituten, obwohl ausländische Zweigniederlassungen und Ämter dieser Institute nicht den Abschnitten 240.3 und 240.5 bis 240.16 unterliegen, es sei denn, die Zweigniederlassung oder das Büro befasst sich mit einem Kunden in den Vereinigten Staaten. Da die Abschnitte 240.1 und 240.2 die Behörde, den Zweck und den Geltungsbereich der Verordnung und die Definitionen, die in der Verordnung verwendet werden, abdecken, wenn ein Bankinstitut nur Retail-Devisengeschäfte von einer ausländischen Zweigniederlassung oder Niederlassung durchgeführt und auf nicht US-amerikanische Kunden beschränkt ist Abschnitt 240.4. Wie unten beschrieben, erfordert dieser Abschnitt eine Bankinstitut, die im Einzelhandel Forex-Transaktionen engagieren will, um den Vorstand vor Beginn eines Retail-Forex-Geschäft zu informieren. Die Verordnung erstreckt sich auch auf Tochtergesellschaften von Bankinstituten, die nach den Gesetzen der Vereinigten Staaten oder eines US-Staates organisiert sind, es sei denn, die Tochtergesellschaft unterliegt der Zuständigkeit einer anderen Bundesregulierungsbehörde, die ermächtigt ist, (2) (E) des Devisenhandelsgesetzes. 13 Nach ausländischem Recht organisierte Tochtergesellschaften eines Kreditinstituts werden unabhängig von der Staatsangehörigkeit des Kunden nicht abgedeckt. Die Regel gilt für Retail-Devisentermingeschäfte, die von Bankinstituten am oder nach dem Inkrafttreten einbezogen werden. Abschnitt 240.2mdashDefinitions Dieser Abschnitt definiert Begriffe, die für Einzelhandel Forex-Transaktionen und die regulatorischen Anforderungen, die für Retail-Forex-Transaktionen gelten. Die Definition von ldquoretail forex transactionrdquo umfasst in der Regel die folgenden Transaktionen in einer Fremdwährung zwischen einem Bankinstitut und einer Person, die kein förderfähiger Startdruck ist. (I) Eine Zukunft oder Option auf eine solche Zukunft 15 (ii) Optionen, die nicht an einer eingetragenen nationalen Wertpapierbörse gehandelt werden 16 und (iii) bestimmte Leveraged or Margined Transactions. Diese Definition hat mehrere wichtige Merkmale. Erstens, bestimmte Transaktionen in Fremdwährung sind nicht ldquoretail Devisengeschäfte, rdquo und daher nicht unter das Verbot in Abschnitt 742 (c) (2) des Dodd-Frank-Gesetzes. Zum Beispiel, ein ldquospotrdquo Forex-Transaktion, wo eine Währung für ein anderes gekauft wird und die beiden Währungen innerhalb von zwei Tagen ausgetauscht werden, ist nicht ein ldquofuturerdquo und würde nicht die Definition eines ldquoretail Devisengeschäft, rdquo da tatsächliche Lieferung erfolgt so bald wie praktikabel. 17 In ähnlicher Weise enthält ein ldquoretail-Devisentransaktionsgeschäft keinen Terminkontrakt mit einer kaufmännischen Einheit, die eine vollstreckbare Verpflichtung zur Erfüllung oder Übernahme einer Lieferung schafft, vorausgesetzt, der Geschäftspartner hat die Möglichkeit, Lieferung und Annahme der Lieferung im Zusammenhang mit seinem Geschäftszweig vorzunehmen. 18 Darüber hinaus umfasst ldquoretail forex transactionrdquo kein ldquo-identifiziertes Bankprodukt oder einen Teil eines ldquoidentifizierten Bankprodukts, rdquo gemäß Definition in Abschnitt 401 (b) des Gesetzes über die Sicherheit von Bankprodukten von 2000. 19 Schließlich ist die Definition nicht Umfassen Transaktionen, die an einer Wertpapierbörse durchgeführt werden, und Bankinstitute sind nicht berechtigt, Einzelhandels-Devisengeschäfte auf einem bestimmten Vertragsmarkt durchzuführen. Zweitens bezieht sich die Definition von ldquoretail forex transactionrdquo auf Rolling-Spot-Devisentransaktionen, die auf Leverage - oder Margin-Basis angeboten werden (so genannte Zelener thinsp 20-Kontrakte), einschließlich solcher ohne Einschränkung im Internet, über ein Mobiltelefon oder über Eine elektronische Plattform. Ein Rolling Spot Forex-Transaktion erfordert in der Regel die Lieferung von Währung innerhalb von zwei Tagen, wie Spot-Transaktionen. In der Praxis werden diese Verträge jedoch jeden zweiten Tag unbegrenzt erneuert und keine Währung wird tatsächlich geliefert, bis eine Partei die Position beendet. 21 Daher sind die Verträge ökonomisch eher wie Futures als Kassageschäfte, obwohl einige Gerichte sie als Kassageschäfte in Form gehalten haben. 22 Einer der Berufsgenossenschaft-Stellungnahmen wurde von der American Bankers Association und der Global Financial Markets Associations Global Foreign Exchange Division (nachfolgend ldquothe ABA / GFMA letterrdquo) vorgelegt. Im Kommentarbrief wurde eine Klärung oder Erleichterung gefordert, die zur Freistellung bestimmter Devisengeschäfte durch Privatkunden führen würde, die ausschließlich zum Zwecke der Vollendung einer Transaktion in ausländischen Wertpapieren initiiert wurden. Dieser Kommentarbrief wurde an alle föderalen Regulierungsagenturen gerichtet, die die Handelsforschungsregeln verabschiedet oder vorgeschlagen haben: dem Board, dem CFTC, dem FDIC, dem OCC und der Securities and Exchange Commission. Am 18. Juli 2012 erließ die CFTC eine abschließende Regel, die eine Interpretation für Devisentermingeschäfte einschloss, die auf den ABA / GFMA-Brief antwortete. Insbesondere hat der CFTC einen Devisentermingeschäft definiert, der den Kauf oder Verkauf eines Fremdwährungsbetrags in Höhe des Preises eines ausländischen Wertpapiers beinhaltet, in dem (i) die Sicherheit und die damit zusammenhängenden Devisentransaktionen gleichzeitig durchgeführt werden, um die Lieferung zu bewirken Durch die jeweilige Wertpapierabrechnungsfrist und (ii) die tatsächliche Lieferung der Fremdwährung bis zu dieser Frist erfolgt. Durch die Interpretation des CEA, um diese Arten von Retail-Devisengeschäften im Zusammenhang mit Wertpapierkäufen und - verkäufen auszuschließen, hat die CFTC bestätigt, dass die Transaktionen nicht den Bestimmungen des CEA unterliegen, auf die in Ziffer 742 des Dodd-Frank-Gesetzes verwiesen wird. Der Verwaltungsrat ist der Auffassung, dass keine Änderung der endgültigen Regelung erforderlich ist, um diese Frage anzugehen. Der Verwaltungsrat hat der Schlussregel auch einen Abschnitt hinzugefügt, um klarzustellen, dass der Verwaltungsrat die Bestimmungen dieser Regel für ein bestimmtes Einzelhandels-Devisengeschäft oder eine Klasse von Retail-Devisengeschäften ändern kann, wenn der Verwaltungsrat feststellt, dass die Änderung mit Sicherheit und Solidität vereinbar ist Schutz der Retail-Forex-Kunden. Abschnitt 240.2 definiert mehrere Begriffe unter Bezugnahme auf das CEA, einschließlich ldquoquivalenzfähigen Vertragsteilnehmern (ECP). Fremdwährungstransaktionen mit förderfähigen Vertragsteilnehmern gelten nicht als Einzelhandelsgeschäfte und unterliegen daher nicht dieser Regel. Die Definition umfasst eine Vielzahl von Finanzinstituten, Regierungsstellen, bestimmte Unternehmen und Einzelpersonen, die bestimmte Investitionsschwellen erfüllen. 23 Der Kommentarbrief der Global FX Division (im Folgenden: GFMA letterrdquo) und der Bankkommentator erklärten, dass die Definition des ldquoquivalenten Kontraktteilnehmers zu eng sei und die Bankinstitute unnötigerweise dazu verpflichteten, den anspruchsvollen Kunden Einzelhandelsschutz zu bieten Nicht als ECPs qualifizieren, weil sie nicht die 10-Millionen-Asset-Schwelle in der gesetzlichen Definition erfüllen. Der Fachverband Kommentator und der Bankkommentator empfahlen, dass die Definition von ldquoretail forex customerrdquo in Abschnitt 240.2 (n) aus institutionellen Nicht-ECPs durch eingetragene Anlageberater vertreten. Der Fachverband Kommentator suchte auch eine reduzierte Belastung für einen Rohstoffpool, der nicht beweisen kann, dass alle seine Teilnehmer selbst ECPs sind. Das GFMA-Schreiben schlug auch vor, dass, wenn der Vorstand diese Unternehmen nicht von allen Aspekten der Verordnung befreit, sollte das Board auf ein Minimum, was es nennt ldquoprofessionellen nicht-ECPsrdquo zu (1) Opt out of Offenlegung Anforderungen, einschließlich der profitablen Konten Wie in Abschnitt 240.6 (e) beschrieben, (2) nach einer geringeren Marge im Vergleich zu den Einzelhandelskunden und (3) der Transaktionsausführungsflexibilität, die gemäß dem Verordnungsvorschlag zulässig ist. Der Vorstand ist nicht der Ansicht, dass eine Nicht-ECP als ECP auf der Grundlage ihrer Verwendung eines Anlageberaters behandelt werden sollte, da sie der Ansicht ist, dass CEA Abschnitt 2 (c) (2) (E) die Anwendung von Einzelhandelsforschungsregeln auf Transaktionen erfordert Mit nicht-ECPs. Obwohl sich große Anlageberater entschieden haben, den Umgang mit anspruchslosen Anlegern zu vermeiden, ist der Board nicht der Auffassung, dass die Beteiligung eines großen Anlageberaters ein Ersatz für den von dem Kongress geforderten Einzelhandelsschutz ist, der in Abschnitt 2 (C) (2) (E) Die CEA. Die Frage nach dem EKP-Status von Rohstoffpools, die Devisengeschäfte tätigen, wurde in die Bekanntmachung der CFTC über die vorgeschlagene Regelung zur weiteren Definition bestimmter Dedd-Frank-Gesetzesbegriffe, darunter ldquoquivalenzfähiger Vertragsteilnehmer, rdquothinsp 24, aufgenommen und in ihrer endgültigen Regelung, die am 6. April angenommen wurde, behandelt , 2012. 25 Die CFTC-Definition von ECP reduziert die Belastung von Rohstoffpools, die versuchen, festzustellen, dass alle ihre Mitglieder selbst ECPs sind. Der Board ändert die Definition von ECP in Abschnitt 240.2 der Verordnung, um die CFTCs überarbeitete Definition von ECP zu integrieren. Dies ermöglicht es Bankinstituten, denselben Standard für ECP-Status wie Retail-Devisenhändler zu verwenden, die der CFTC-Zuständigkeit im Umgang mit Rohstoffpools unterliegen. Im Einklang mit den Bestimmungen des CEA und der endgültigen CFTC-Richtlinie verabschiedet der Board die Kommentatoren nicht, dass Rohstoffpools von der gesetzlichen Anforderung ausgeschlossen sind, dass ihre Mitglieder selbst ECPs sind. Der GFMA-Brief auch geklärt, dass ein Bankinstitut mit einem Retail-Forex-Kunde, der später ein ECP wird weiterhin den Kunden als Retail-Forex-Kunde (d. H. Als nicht-ECP) zu behandeln. Der Verwaltungsrat ist der Auffassung, dass ein Bankinstitut die Bestimmungen eines solchen Kunden weiterhin einhalten kann. In der Tat kann ein Bankinstitut die Bestimmungen der Verordnung NN auf Geschäfte mit jedem Kunden anwenden, obwohl es nur erforderlich ist, die Verordnung auf Retail-Devisengeschäfte mit Retail-Devisenkunden anzuwenden. Der Verwaltungsrat erhielt keine Kommentare zu den vorgeschlagenen Definitionen außer ldquoeligible Vertragsteilnehmer. rdquo Neben der Änderung der Definition von ECP, fügt der Vorstand eine Definition von ldquosavings und Darlehen holding company. rdquo In allen anderen Punkten wird dieser Abschnitt im Wesentlichen angenommen Wie vorgeschlagen. Section 240.3mdashProhibited Transactions Dieser Abschnitt untersagt einem Bankinstitut und seinen damit zusammenhängenden Personen ein betrügerisches Verhalten im Zusammenhang mit Retail-Devisengeschäften. Dieser Abschnitt bezieht sich auch auf potenzielle Interessenkonflikte, indem es einem Bankinstitut verbietet, als Gegenpartei eines Retail-Devisengeschäfts zu handeln, wenn das Bankinstitut oder seine Tochtergesellschaft über die Kunden-Einzelhandels-Devisenkonto eine Diskretion ausübt. Der Boards Vorschlag verwendet Wording etwas anders als die von der CFTC, OCC und FDIC verwendet. Während der Einzelhandel Forex-Regeln anderer Bundes-Regulierungsbehörden, dass ein Einzelhandel Forex-Kontrahent kann nicht ldquocheat oder betrügen oder versuchen, betrügen oder betrügen jede Person, der Boards Vorschlag verwendet die Phrase ldquodefraud oder versuchen zu defraud. rdquo Der individuelle Kommentator empfohlen mit ldquocheat oder Defraudrdquo anstelle von ldquodefraud, rdquo, das er glaubt, würde regulatorische Konsistenz über Regulatoren fördern. Der Ausschuss stellt fest, dass der Begriff ldquocheat oder defraudrdquo in Abschnitt 6b des CEA verwendet wird (ldquoContracts entworfen, um betrogen oder irreadrdquo) thinsp 26 und ändert seinen Vorschlag, die gleiche Sprache wie die CEA und andere Regulierungsbehörden zu verwenden. Darüber hinaus würde der Boards Vorschlag untersagen, ein Bankinstitut aus ldquoknowinglyrdquo machen einen falschen Bericht oder täuschen eine Person, während die anderen Regulierungsbehörden verbieten ihre Retail-Devisenhändler aus ldquowillfullyrdquo in diese Aktivitäten. Der Board erklärte seine Überzeugung, dass ldquoknowinglyrdquo setzt einen angemesseneren Beweis. Der einzelne Kommentator bevorzugt die Sprache von anderen Regulierungsbehörden verwendet, zum Teil zur Verbesserung der regulatorischen Konsistenz. Das Department of Justices (DOJs) US Attorneys Manual diskutiert den Unterschied zwischen ldquoknowinglyrdquo und ldquowillfullyrdquo in Bezug auf 18 U. S.C. 1001. die Bundes-Strafgesetze allgemeine Betrugsbekämpfung Bestimmung. 27 Diese Diskussion steht im Einklang mit einem Urteil des Obersten Gerichts über eine andere Bestimmung des Strafgesetzbuches. 28 Sowohl der DOJ als auch der Gerichtshof weisen darauf hin, dass eine Verletzung des Rechtsbehelfs einen Nachweis verlangt, dass der Angeklagte mit der Erkenntnis gehandelt hat, dass sein Verhalten rechtswidrig sei, während eine Verletzung der Rechtswidrigkeit die Kenntnis der Tatbestände, die die Straftat darstellen, unterscheiden. Der Board glaubt, dass ldquoknowinglyrdquo den angemesseneren Standard setzt, da er einen falschen Bericht oder ein irreführendes Verhalten umfassen wird, ohne dass ein Nachweis verlangt wird, dass das Bankinstitut wusste, dass es gegen die Verordnung NN verstößt. Abschnitt 240.4mdashNotification Dieser Abschnitt erfordert, dass eine Bankinstitut den Vorstand vor dem Engagement in einem Einzelhandel Forex-Geschäft benachrichtigen. Diese Bekanntmachung enthält Informationen über Kunden-Due Diligence (einschließlich Kreditauswertungen, Kunden-Angemessenheit, und ldquoknow Ihre customerrdquo Dokumentation) neue Produkt-Zulassungen Haarschnitte für noncash Marge und Interessenkonflikte. Darüber hinaus muss das Bankinstitut bestätigen, dass es angemessene schriftliche Grundsätze, Verfahren und Risikomess - und - managementsysteme und - kontrollen enthält, um sich in einem Retail-Forex-Geschäft sicher und gesund und unter Beachtung der Anforderungen der Boards Retail Forex-Regel zu engagieren . Sobald ein Kreditinstitut den Verwaltungsrat gemäß dieser Bestimmung unterrichtet hat, hat der Verwaltungsrat sechzig Tage Zeit, um zusätzliche Informationen oder Einwände gegen die Benachrichtigung schriftlich einzuholen, oder die Anmeldung gilt als wirksam. Wendet der Vorstand zusätzliche Informationen an, so wird die Bekanntmachung sechzig Tage nach Eingang aller eingegangenen Informationen durch den Verwaltungsrat wirksam, es sei denn, der Vorstand hat schriftlich zu entscheiden. Obwohl die gesetzlichen Anforderungen in Bezug auf Futures-und Optionskontrakte derzeit in Kraft sind, können einige Bankinstitute derzeit im Einzelhandel Forex-Transaktionen, die von dieser Regel abgedeckt werden würde, wie die so genannte ldquoZelener contracts. rdquo Banking Institutionen in Einzelhandel Forex engagieren Transaktionen ab dem Zeitpunkt des Inkrafttretens dieser Regel, die den Vorstand unverzüglich benachrichtigen, sechs Monate oder einen längeren Zeitraum haben, der vom Verwaltungsrat zur Verfügung gestellt wird, um ihre Operationen in Übereinstimmung mit der Regel zu bringen. Gemäß dieser Vorschrift wird ein Bankinstitut, das den Verwaltungsrat innerhalb von 30 Tagen nach dem Wirksamwerden der endgültigen Einzelhandelsforschungsregelung unter der Voraussetzung einer Verlängerung durch den Verwaltungsrat benachrichtigt und die von dem Verwaltungsrat danach angeforderten Informationen übermittelt, seine Geschäftstätigkeit ausüben Forex-Geschäft gemäß einer Vorschrift oder Regulierung einer Bundes-Regulierungsbehörde, wie es nach dem Commodity Exchange Act für diesen Zeitraum erforderlich ist. 29 Ein Bankinstitut muss nicht eine Futures-Selbstregulierung Organisation als Voraussetzung für die Durchführung einer Retail-Forex-Geschäft. Start Gedruckt Seite 21023 Der Vorstand hat keine Kommentare zu diesem Abschnitt erhalten und nimmt sie wie vorgeschlagen an. Abschnitt 240.5mdashAnwendung und Ausschluss von Long - und Short-Positionen Dieser Abschnitt erfordert, dass ein Bankinstitut die Auslagerung von Long - und Short-Positionen in derselben Währung in einem Retail-Forex-Konto abschließt. Dennoch kann ein Bankinstitut die Einzelhandels-Devisengeschäfte durch den Retail-Forex-Kunden oder den Kunden-Agenten (außer dem Bankinstitut selbst) gemäß einer kundenspezifischen Anleitung kompensieren. Deckenanweisungen reichen hierfür nicht aus, da sie die allgemeine Regel ausschließen könnten. Jedoch müssen Versatzanweisungen nicht separat für jedes Paar von Aufträgen gegeben werden, um ldquospecific. rdquo zu sein. Anweisungen, die auf ausreichend definierte Sätze von Transaktionen zutreffen, könnten spezifisch genug sein. Versatzanweisungen können schriftlich oder mündlich erteilt werden. Das Bankinstitut muss eine Aufzeichnung jeder Versatzanweisung erstellen und pflegen. Der Verwaltungsrat erhielt keine Bemerkungen zu diesem Abschnitt und verabschiedet sie wie vorgeschlagen. Abschnitt 240.6mdashDisclosure Dieser Abschnitt erfordert, dass eine Bankinstitut Einzelhändler Forex-Kunden eine Risiko Offenlegungserklärung, ähnlich wie die von der CFTCs Retail Forex-Regel, aber maßgeschneidert, um bestimmte einzigartige Merkmale des Retail-Forex in Bankinstitute Adresse zu stellen. Die vorgeschriebene Risiko-Offenlegungserklärung beschreibt die Risiken, die mit Retail-Devisengeschäften verbunden sind. Die Offenlegungserklärung macht deutlich, dass ein Bankinstitut, das das Recht auf Aufrechnung zur Einzugsermächtigung oder zur Deckung von Verlusten aus Retail-Devisengeschäften nutzen möchte, dieses Recht in die Offenlegungserklärung aufnehmen und eine gesonderte schriftliche Anerkennung erhalten muss (vgl Aufrechnung nach Ziffer 240.9). Die endgültigen Regeln der CFTC, OCC und FDIC erfordern Retail-Devisenhändler, den Einzelkunden den Prozentsatz der Einzelhandels-Devisenkonten, die einen Gewinn erwirtschafteten, und den Prozentsatz dieser Konten, die einen Verlust erlebt haben, in jedem der letzten vier Kalender zu offenbaren Werden. 30 Der einzelne Kommentator schlug vor, dass dieses ldquoprofitable accounts ratiordquo manipuliert werden könnte, obwohl er nicht beschrieb, wie dies geschehen konnte, und empfahl die Annahme einer objektiven und einheitlichen Berechnungsmethode für das Verhältnis. Der Kommentator empfahl auch, dass die Berechnung gewichtet werden sollte durch die Höhe des Gewinns oder Verlustes, um die Höhe der Rentabilität oder Verlust zu zeigen, anstatt nur, ob irgendein Konto einen Gewinn gemacht. Der Verwaltungsrat ist der Auffassung, dass eine Berechnung der Rentabilität eher dazu führen würde, dass Einzelhandelskunden glauben, dass die Wertentwicklung in der Vergangenheit ein Indikator für die zukünftigen Ergebnisse ist und die Gewinn - und Verlustrechnung sowie die Gewinn - Darüber hinaus ist der Board der Ansicht, dass eine einheitliche Berechnung der gewinnbringenden Konten und die Aufstellung von gewinnbringenden Geschäften für alle Devisenhändler einen größeren Privatkonsumentenschutz ermöglichen, indem sie einen Vergleich zwischen verschiedenen Händlern ermöglichen. Schließlich stellt der Board fest, dass Abschnitt 240.7 (b) eine Berechnungsmethodik für das Verhältnis zwischen Gewinn - und Verlustrechnung vorsieht, die in allen Bankenregulierungsbehörden einheitlich ist. 31 Wie vorgeschlagen, ist die Risikoverteilung als gesondertes Dokument vorzulegen. Der Board forderte eine Stellungnahme dazu auf, ob es den Banken gestattet sein sollte, die Offenlegung des Einzelhandels-Forex-Risikos mit anderen Offenlegungen zu kombinieren, die Bankinstitute ihren Kunden anbieten. Der einzelne Kommentator unterstützte den Boards-Vorschlag, der mit den endgültigen Regeln der anderen Regulierungsbehörden der Bank vereinbar ist. Der einzelne Kommentator suchte Klarstellung darüber, ob die Anforderung in Abschnitt 240.6 (f), dass das Bankinstitut offenbart ldquoany Gebühr, Gebühr oder commissionrdquo auferlegt auf den Kunden für Einzelhandel Forex-Transaktionen umfasst Spreads. Die endgültigen Regeln, die von der OCC und FDIC beide erfordern Offenlegung von ldquoany Gebühr, Gebühr, Ausbreitung oder commissionrdquo und die einzelnen Kommentator empfohlen, dass der Vorstand fügen Sie das Wort ldquospreadrdquo zu seinen Regeln. Der Board glaubt, dass Spreads durch die vorgeschlagene Sprache abgedeckt sind, sondern fügt das Wort ldquospreadsrdquo zu diesem Abschnitt, um diese Deckung explizit. Der einzelne Kommentator bat auch um Bestätigung, dass die Offenlegung von ldquoany Gebühr, Gebühr oder commissionrdquo Zinserträge auf dem Einzelhandel Forex-Konto oder Retail-Devisengeschäft. Der Zinsfuß, der auf Bardemarge gezahlt wird, ist keine Gebühr, Gebühr, Verbreitung oder Provision und muss daher nicht nach Abschnitt 240.6 offen gelegt werden. Abschnitt 240.7mdashRecordkeeping Dieser Abschnitt legt fest, welche Dokumente und Aufzeichnungen ein Bankinstitut im Einzelhandel Forex-Transaktionen engagiert muss für die Prüfung durch den Vorstand zu bewahren. Bankinstitute sind verpflichtet, Einzelhandels-Forex-Konto-Datensätze, Finanz-Ledger, Transaktionsdatensätze, tägliche Aufzeichnungen, Bestellung Tickets und Aufzeichnungen mit Zuweisungen und Noncash-Marge, sowie Aufzeichnungen über mögliche Verstöße gegen das Recht zu halten. In diesem Abschnitt werden auch Dokumentenwartungsstandards, einschließlich Art und Dauer der Wartung, vorgeschrieben. Schließlich erfordert dieser Abschnitt Bankinstitute aufzeichnen und Aufrechterhaltung Transaktionsdatensätze und stellen sie den Kunden zur Verfügung. Der Einzelkommentator schlug vor, dass Aufzeichnungen, die nach diesem Abschnitt erforderlich sind, vom Forex-Händler für immer beibehalten werden, anstatt der Mindestlaufzeit von fünf Jahren gemäß Abschnitt 240.7 (h). Der Verwaltungsrat hält es nicht für angebracht, die Aufzeichnungen unbegrenzt aufrechtzuerhalten und stellt fest, dass der Zeitraum von fünf Jahren mit den Aufbewahrungspflichten für viele vom Verwaltungsrat vorgeschriebene Überwachungs - und Regulierungsaufzeichnungen übereinstimmt. Dieser Abschnitt wird wie vorgeschlagen angenommen. § 240.8mdashKapitalanforderungen Die Boards Retail Forex Regel ändert nichts an den Boards Vorschriften über Kapital. Dieser Abschnitt erfordert in der Regel, dass ein Bankinstitut, das Einzel - oder Devisentermingeschäfte anbietet oder betreibt, gemäß den Bestimmungen in den Boards Regulations H, Y und LLthinsp 32 ldquowell capitalizedrdquo oder das Bankinstitut muss eine Befreiung vom Board erhalten. Eine nicht versicherte staatlich lizenzierte US-Niederlassung oder Agentur einer ausländischen Bank muss die Kapitalregeln anwenden, die gemäß § 225.2 (r) (3) der Boards Regulation Y auf sie anwendbar sind. 33 Eine Edge Corporation oder Vereinbarung Corporation muss Die auf eine gemäß § 211.12 (c) (2) der Boards Regulation K. im Bankgeschäft tätige Edge Corporation anwendbar sind. 34 Darüber hinaus muss ein Bankinstitut nach wie vor ein Kapital gegen Retail-Devisengeschäfte halten Die Boards Vorschriften. Der Verwaltungsrat erhielt keine Bemerkungen zu diesem Abschnitt und verabschiedet sie wie vorgeschlagen. Abschnitt 240.9mdashMargin-Anforderungen Absatz (a) erfordert eine Bankinstitut, die sich im Einzelhandel Forex-Transaktionen, im Voraus einer solchen Transaktion, von der Retail-Devisen-Kunden-Marge in Höhe von mindestens zwei Prozent des Nennwerts der Start Printed Page 21024 zu sammeln Einzelhandel Forex-Transaktion, wenn die Transaktion in einem großen Währungspaar und mindestens fünf Prozent des Nominalwertes der Retail-Devisengeschäft sonst. Diese Margin-Anforderungen sind identisch mit den Anforderungen der Retail Forex-Regeln der CFTC, OCC und FDIC. Ein wichtiges Währungspaar ist ein Währungspaar mit zwei Hauptwährungen. Die wichtigsten Währungen der Verordnung sind der US-Dollar (USD), der kanadische Dollar (CAD), der Euro (EUR), der britische Pfund (GBP), der japanische Yen (JPY), der Schweizer Franken (CHF), der neuseeländische Dollar (NZD ), Australischer Dollar (AUD), Schwedische Kronor (SEK), Dänische Kronen (DKK) und Norwegische Krone (NOK), 35 sowie jede andere vom Board festgelegte Währung. Vor der Umsetzung der CFTC-Regel haben Nichtbankhändler routinemäßig den Kunden erlaubt, mit einer 1-prozentigen Marge (Leverage von 100: 1) und manchmal mit einer Marge von nur 0,25 Prozent (Leverage von 400: 1) zu handeln. Als der CFTC im Januar 2010 seine Handelsforschungsregel vorgeschlagen hatte, schlug er eine Margeanforderung von 10 Prozent (Hebelkraft von 10: 1) vor. Als Reaktion auf die Kommentare reduzierte die CFTC die geforderte Marge in der endgültigen Regel auf 2 Prozent (Hebelwirkung von 50: 1) für Trades mit Hauptwährungen und 5 Prozent (Hebelwirkung von 20: 1) für Trades mit nicht-bedeutenden Währungen. Diese Margin-Anforderungen wurden auch von der OCC und FDIC verabschiedet. Der Verwaltungsrat erhielt keine Stellungnahmen zur angemessenen Marge und erließ die gleichen Anforderungen wie die CFTC und andere Bankenaufsichtsbehörden. Absatz (b) legt die zulässigen Marginformen fest, die von den Kunden verlangt werden können, einschließlich einer Marge, die über den Anforderungen von Absatz (a) hinausgeht. Banking institutions must establish policies and procedures providing for haircuts for noncash margin collected from customers and must review these haircuts annually. It may be prudent for banking institutions to review and modify the size of the haircuts more frequently. Paragraph (c) requires a banking institution to collect additional margin from the customer or to liquidate the customers position if the amount of margin held by the banking institution fails to meet the requirements of paragraph (a). The proposed rule requires the banking institution to mark the customers open retail forex positions and the value of the customers margin to the market daily to ensure that a retail forex customer does not accumulate substantial losses not covered by margin. The retail forex regulations adopted by the OCC and FDIC both prohibit set-off, i. e. . the bank forex dealer is prohibited from applying a retail forex customers losses against any asset or liability of the retail forex customer other than money or property given as margin. Banks generally have broad rights to set off mutual debts to cover customer obligations. It is not clear that limiting a banks right of set-off in these particular transactions would provide appropriate incentives for retail forex customers. The Boards proposed rule did not include this prohibition and no comments were received opposing this proposal. The Board is adopting these provisions as proposed. In order to effectuate the prohibition against a bank retail forex dealer exercising a right of set-off, the OCC and FDIC require that each customers retail forex transaction margin be held in a separate account that holds only that customers retail forex transaction margin. As proposed, the Board is not requiring the use of a separate margin account, as it is not prohibiting a banking institution from exercising a right of set-off. Section 240.10mdashRequired reporting to customers This section requires a banking institution engaging in retail forex transactions to provide each retail forex customer confirmations and monthly statements, and describes the information to be included. The Board received no comments to this section and adopts it as proposed. Section 240.11mdashUnlawful Representations This section prohibits a banking institution and its related persons from representing that the Federal government, the Board, or any other Federal agency has sponsored, recommended, or approved retail forex transactions or products in any way. This section also prohibits a banking institution from implying or representing that it will guarantee against or limit retail forex customer losses or not collect margin as required by section 240.9. This section does not prohibit a banking institution from sharing in a loss resulting from error or mishandling of an order, and guaranties entered into prior to the effectiveness of the prohibition would only be affected if an attempt is made to extend, modify, or renew them. This section also does not prohibit a banking institution from hedging or otherwise mitigating its own exposure to retail forex transactions or any other foreign exchange risk. The Board received no comments to this section and adopts it as proposed. Section 240.12mdashAuthorization to Trade This section requires a banking institution to have specific authorization from a retail forex customer before effecting a retail forex transaction for that customer. The Board received no comments to this section and adopts it as proposed. Section 240.13mdashTrading and Operational Standards This section largely follows the trading standards of the retail forex rules adopted by the CFTC, OCC and FDIC, which were developed to prevent some of the deceptive or unfair practices identified by the CFTC and the National Futures Association. Under paragraph (a), a banking institution engaging in retail forex transactions is required to establish and enforce internal rules, procedures and controls to prevent front running, in which transactions in accounts of the banking institution or its related persons are executed before a similar customer order, and to establish settlement prices fairly and objectively. Paragraph (b) prohibits a banking institution engaging in retail forex transactions from disclosing that it holds another persons order unless disclosure is necessary for execution or is made at the Boards request. Paragraph (c) ensures that related persons of another retail forex counterparty do not open accounts with a banking institution without the knowledge and authorization of the account surveillance personnel of the other retail forex counterparty to which they are affiliated. Similarly, paragraph (d) ensures that related persons of a banking institution do not open accounts with other retail forex counterparties without the knowledge and authorization of the account surveillance personnel of the banking institution to which they are affiliated. Paragraph (e) prohibits a banking institution engaging in retail forex transactions from (1) Entering a retail forex transaction to be executed at a price that is not at or near prices at which other retail forex customers have executed materially similar transactions with the banking institution during the same time period, (2) changing prices after confirmation, (3) providing a retail forex customer with a new bid price that is higher (or lower) than previously provided without providing a new ask Start Printed Page 21025 price that is similarly higher (or lower) as well, and (4) establishing a new position for a retail forex customer (except to offset an existing position) if the banking institution holds one or more outstanding orders of other retail forex customers for the same currency pair at a comparable price. Paragraphs (e)(3) and (e)(4) do not prevent a banking institution from changing the bid or ask prices of a retail forex transaction to respond to market events. The Board understands that market practice among CFTC-registrants is not to offer requotes, but to simply reject orders and advise customers they may submit a new order (which the dealer may or may not accept). Similarly, a banking institution may reject an order and advise customers they may submit a new order. Paragraph (e)(5) requires a banking institution to use consistent market prices for customers executing retail forex transactions during the same time. It also prevents a banking institution from offering preferred execution to some of its retail forex customers but not others. The Board received no comments to this section and adopts it as proposed. Section 240.14mdashSupervision This section imposes on a banking institution and its agents, officers, and employees a duty to supervise subordinates with responsibility for retail forex transactions to ensure compliance with the Boards retail forex rule. The Board received no comments to this section and adopts it as proposed. Section 240.15mdashNotice of Transfers This section describes the requirements for transferring a retail forex account. Generally, a banking institution must provide retail forex customers 30 days prior notice before transferring or assigning their account. Affected customers may then instruct the banking institution to transfer the account to an institution of their choosing or liquidate the account. There are three exceptions to the above notice requirement: a transfer in connection with the receivership or conservatorship under the Federal Deposit Insurance Act a transfer pursuant to a retail forex customers specific request and a transfer otherwise allowed by applicable law. A banking institution that is the transferee of retail forex accounts must generally provide the transferred customers with the risk disclosure statement of section 240.6 and obtain each affected customers written acknowledgement within 60 days. The Board received no comments to this section and adopts it as proposed. Section 240.16mdashCustomer Dispute Resolution This section prohibits a banking institution from entering into any agreement or understanding with a retail forex customer in which the customer agrees, prior to the time a claim or grievance arises, to submit the claim or grievance to any settlement procedure. This provision differs from the applicable CFTC and OCC dispute settlement procedures, which permit mandatory pre-dispute settlement agreements under certain conditions. 36 The Board proposed to prohibit a banking institution from entering into a pre-dispute settlement agreement with a retail forex customer, similar to the final rule adopted by the FDIC. The Department of State has advised that transactions between the foreign branch or office of a banking institution and a U. S. customer could be cross-border transactions subject to the New Yorkthinsp 37 and Panama Conventions. 38 These Conventions, implemented in the United States by chapters 2 and 3 of the Federal Arbitration Act (FAA), 39 create treaty obligations to enforce international commercial arbitration agreements and to recognize and enforce international commercial arbitral awards. The Board is amending section 240.16 to provide that it will not apply to transactions covered by chapters 2 or 3 of the FAA. Section 240.17mdashReservation of Authority. This section allows the Board to modify certain requirements of this rule consistent with safety and soundness and the protection of retail forex customers. The Board understands the need for flexibility as foreign exchange trading procedures develop and to ensure that such products or trading procedures are subject to appropriate customer protection and safety and soundness standards. Interagency Statement on Retail Sales of Nondeposit Investment Products For banking institutions, the requirements in the Boards retail forex regulation overlap with applicable expectations contained in the Interagency Statement on Retail Sales of Nondeposit Investment Products (NDIP Policy Statement). 40 The NDIP Policy Statement sets out guidance regarding the Boards expectations when a banking institution engages in the sale of nondeposit investment products to retail customers. The NDIP Policy Statement addresses issues such as disclosure, suitability, sales practices, compensation, and compliance. The Board views retail forex transactions as nondeposit investment products, but the terms ldquoretail forex customerrdquo in this rule and ldquoretail customerrdquo in the NDIP Policy Statement are not necessarily co-extensive. The Board requested comment on whether the proposed regulation created issues concerning application of the NDIP policy statement to retail forex transactions that the Board should address. The Board received no comments on this issue. As the Board noted in its proposal, after the effective date of the final rule, the Board will expect banking institutions engaging in or offering retail forex transactions to also comply with the NDIP Policy Statement to the extent such compliance does not conflict with the requirements of the Boards final retail forex rule. III. Regulatory Analysis A. Regulatory Flexibility Act In accordance with Section 4(a) of the Regulatory Flexibility Act, 5 U. S.C. 601 et seq, (RFA), the Board must publish a final regulatory flexibility analysis with this rulemaking. The RFA requires an agency either to provide a final regulatory flexibility analysis with a final rule for which a general notice of proposed rulemaking is required or to certify that the final rule will not have a significant economic impact on a substantial number of small entities. Based on this analysis and for the reasons stated below, the Board believes that the final rule would not have a significant economic impact on a substantial number of small entities. Nevertheless, the Board is publishing a final regulatory flexibility analysis. 1. A succinct statement of the need for, and objectives of, the rule. Section 2(c)(2)(E) of the Commodity Exchange Act (7 U. S.C. 2 (c)(2)(E)) Start Printed Page 21026 prohibits a U. S. financial institution from conducting certain retail foreign exchange transactions unless done pursuant a rule or regulation of a Federal regulatory agency allowing such transactions. The Board is adopting a new regulation to allow banking institutions under its supervision to engage in retail foreign exchange transactions. 2. A Summary of the Significant Issues Raised by the Public Comments in Response to the Initial Regulatory Flexibility Analysis, a Summary of the Assessment of the Agency of Such Issues, and a Statement of Any Changes Made in the Proposed Rule as a Result of Such Comments The Board requested comment on required reporting, disclosure, and recordkeeping requirements for all banking institutions engaging in retail foreign exchange transactions and has solicited comment on any approaches that would reduce the burden on all counterparties, including small entities. In response to the notice of proposed rulemaking, the Board received no comments with respect to RFA. 3. A Description of and an Estimate of the Number of Small Entities To Which the Rule Will Apply or an Explanation of Why No Such Estimate Is Available Under regulations issued by the Small Business Administration, a banking institution is considered a ldquosmall entityrdquo if it has assets of 175 million or less. 41 As of June 30, 2012, there were approximately 368 small state member banks, 6 small Edge Act and agreement corporations, 48 small uninsured branches of foreign banks, 3,736 small bank holding companies, 213 small financial holding companies, and 229 small saving and loan holding companies. The Board is not aware of any small institutions engaged in retail forex transactions. 4. A Description of the Projected Reporting, Recordkeeping, and Other Compliance Requirements of the Rule, Including an Estimate of the Classes of Small Entities Which Will Be Subject to the Requirement and the Type of Professional Skills Necessary for Preparation of the Report or Record A description of the projected recordkeeping and other compliance requirements can be found below in section B, ldquoPaperwork Reduction Act, rdquo under the following headings: Reporting Requirements, Disclosure Requirements, and Recordkeeping Requirements. The Board believes that there are no other compliance requirements for this rule. 5. A Description of the Steps the Agency Has Taken To Minimize the Significant Economic Impact on Small Entities Consistent With the Stated Objectives of Applicable Statutes, Including a Statement of the Factual, Policy, and Legal Reasons for Selecting the Alternative Adopted in the Final Rule and Why Each One of the Other Significant Alternatives to the Rule Considered by the Agency Which Affect the Impact on Small Entities Was Rejected The Board believes that no Federal rules duplicate, overlap, or conflict with the rule. The Board has solicited comments on the proposed rule and received relatively few comments. The Board did not receive any comments from small entities and is unaware of any small entities that will be affected by the rule. The Boards rule is consistent with other banking regulators that also solicited comment on their rules. As noted in the supplementary information above, retail forex transactions are also subject to the Interagency Statement on Retail Sales of Nondeposit Investment Products, but this rule would govern to the extent of a conflict. B. Paperwork Reduction Act In accordance with section 3512 of the Paperwork Reduction Act (PRA) of 1995 (44 U. S.C. 3501 -3521), the Board may not conduct or sponsor, and a respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number. The Board reviewed the final rule under the authority delegated to the Board by OMB. The OMB control number for these information collections will be assigned. The Board received no comments regarding the Paperwork Reduction Act implications of its retail forex regulation. Title of Information Collection: Reporting, recordkeeping, and disclosure requirements associated with Regulation NN. Frequency of Response: On occasion. Affected Public: Businesses or other for-profit. Respondents: Agreement corporations, Edge Act corporations, state member banks, uninsured branches of foreign banks, financial holding companies, and bank holding companies (collectively, ldquobanking institutionsrdquo). Abstract: The information collection requirements of the final rule are found in sectsectthinsp240.4-240.7, 240.9-240.10, 240.13, 240.15-240.16. Reporting Requirements The reporting requirements in sectthinsp240.4 require that, prior to initiating a retail forex business, a banking institution provide the Board with prior notice. The notice must certify that the banking institution has written policies and procedures, and risk measurement and management systems in controls in place to ensure that retail forex transactions are conducted in a safe and sound manner. The banking institution must also provide other information required by the Board, such as documentation of customer due diligence, new product approvals, and haircuts applied to noncash margins. A banking institution already engaging in a retail forex business may continue to do so, provided it requests an extension of time. Disclosure Requirements Section 240.5, regarding the application and closing out of offsetting long and short positions, requires a banking institution to promptly provide the customer with a statement reflecting the financial result of the transactions and the name of the introducing broker to the account. The customer may provide specific written instructions on how the offsetting transaction should be applied. Section 240.6 requires that a banking institution furnish a retail forex customer with a written disclosure before opening an account that will engage in retail forex transactions for a retail forex customer and receive an acknowledgment from the customer that it was received and understood. It also requires the disclosure by a banking institution of its fees and other charges and its profitable accounts ratio. Section 240.10 requires a banking institution to issue monthly statements to each retail forex customer and to send confirmation statements following transactions. Section 240.13(b) allows disclosure by a banking institution that an order of another person is being held by them only when necessary to the effective execution of the order or when the disclosure is requested by the Board. Section 240.13(c) prohibits a banking institution engaging in retail forex transactions from knowingly handling the account of any related person of another retail forex counterparty unless it receives proper written authorization, promptly prepares a written record of the order, and transmits to the counterparty copies all statements and written records. Section 240.13(d) Start Printed Page 21027 prohibits a related person of a banking institution engaging in forex transactions from having an account with another retail forex counterparty unless it receives proper written authorization and copies of all statements and written records for such accounts are transmitted to the counterparty. Section 240.15 requires a banking institution to provide a retail forex customer with 30 days prior notice of any assignment of any position or transfer of any account of the retail forex customer. It also requires a banking institution to which retail forex accounts or positions are assigned or transferred to provide the affected customers with risk disclosure statements and forms of acknowledgment and receive the signed acknowledgments within 60 days. The customer dispute resolution provisions in sectthinsp240.16 requires certain endorsements, acknowledgments, and signature language. It also requires that within 10 days after receipt of notice from the retail forex customer that they intend to submit a claim to arbitration, the banking institution will provide them with a list of persons qualified in the dispute resolution and that the customer must notify the banking institution of the person selected within 45 days of receipt of such list. Recordkeeping Requirements Sections 240.7 and 240.13(a) require that a banking institution engaging in retail forex transactions keep full, complete, and systematic records and establish and implement internal rules, procedures, and controls. Section 240.7 also requires that a banking institution keep account, financial ledger, transaction and daily records, as well as memorandum orders, post-execution allocation of bunched orders, records regarding its ratio of profitable accounts, possible violations of law, records for noncash margin, and monthly statements and confirmations. Section 240.9 requires policies and procedures for haircuts for noncash margin collected under the rules margin requirements, and annual evaluations and modifications of the haircuts. Estimated PRA Burden Number of Respondents: 5 banking institutions 2 service providers. Estimated Average Hours per Response: 16 hours reporting burden 787 hours disclosure burden and 183 hours recordkeeping burden Total Estimated Annual Burden: 6,870 hours (80 hours reporting burden 5,509 hours disclosure burden and 1,281 hours recordkeeping burden). The Board has a continuing interest in the publics opinions of collections of information. At any time, comments regarding the burden estimate, or any other aspect of this collection of information, including suggestions for reducing the burden, may be sent to: Secretary, Board of Governors of the Federal Reserve System, 20th and C Streets NW. Washington, DC 20551 and to the Office of Management and Budget, Paperwork Reduction Project, Washington, DC 20503. C. Plain Language Section 722 of the Gramm-Leach-Bliley Act requires the Board to use plain language in all proposed and final rules published after January 1, 2000. No commenters suggested that the proposed rule was materially unclear, and the Board believes that the Final Rule is substantively similar to the proposed rule. Start List of Subjects List of Subjects in 12 CFR Part 240 For the reasons stated in the preamble, the Board amends 12 CFR Chapter II by adding new part 240 to read as follows: PART 240mdashRETAIL FOREIGN EXCHANGE TRANSACTIONS (REGULATION NN) 240.1 Authority, purpose, and scope. 240.2 Definitions. 240.3 Prohibited transactions. 240.4 Notification. 240.5 Application and closing out of offsetting long and short positions. 240.6 Disclosure. 240.7 Recordkeeping. 240.8 Capital requirements. 240.9 Margin requirements. 240.10 Required reporting to customers. 240.11 Unlawful representations. 240.12 Authorization to trade. 240.13 Trading and operational standards. 240.14 Supervision. 240.15 Notice of transfers. 240.16 Customer dispute resolution. 240.17 Reservation of authority. Authority, purpose and scope. (a) Authority. This part is issued by the Board of Governors of the Federal Reserve System (the Board) under the authority of section 2(c)(2)(E) of the Commodity Exchange Act (7 U. S.C. 2 (c)(2)(E)), sections 9 and 11 of the Federal Reserve Act (12 U. S.C. 321 -338 and 248), section 5(b) of the Bank Holding Company Act of 1956 (12 U. S.C. 1844 (b)), sections 9 and 13a of the International Banking Act of 1978 (12 U. S.C. 3106 a and 3108), and sections 3(q) and 8 of the Federal Deposit Insurance Act (12 U. S.C. 1813 (q) and 1818). (b) Purpose. This part establishes rules applicable to retail foreign exchange transactions engaged in by banking institutions on or after May 13, 2013. (c) Scope. Except as provided in paragraph (d) of this section, this part applies to banking institutions, as defined in section 240.2(b) of this part, and any branches or offices of those institutions wherever located. This part applies to subsidiaries of banking institutions organized under the laws of the United States or any U. S. state that are not subject to the jurisdiction of another federal regulatory agency authorized to prescribe rules or regulations under section 2(c)(2)(E) of the Commodity Exchange Act (7 U. S.C. (2)(c)(2)(E)). (d) International applicability. Sections 240.3 and 240.5 through 240.16 do not apply to retail foreign exchange transactions between a foreign branch or office of a banking institution and a non-U. S. customer. With respect to those transactions, the foreign branch or office remains subject to any disclosure, recordkeeping, capital, margin, reporting, business conduct, documentation, and other requirements of applicable foreign law. For purposes of this part, the following terms have the same meaning as in the Commodity Exchange Act (7 U. S.C. 1 et seq.): ldquoaffiliated person of a futures commission merchantrdquo ldquoassociated personrdquo ldquocontract of salerdquo ldquocommodityrdquo ldquofutures commission merchantrdquo ldquofuture deliveryrdquo ldquooptionrdquo ldquosecurityrdquo and ldquosecurity futures product. rdquo (a) Affiliate has the same meaning as in section 2(k) of the Bank Holding Company Act of 1956 (12 U. S.C. 1841 (k)). (b) Banking institution means: (1) A state member bank (as defined in 12 CFR 208.2 ) (2) An uninsured state-licensed U. S. branch or agency of a foreign bank (3) A financial holding company (as defined in section 2 of the Bank Holding Company Act of 1956 12 U. S.C. 1841 ) (4) A bank holding company (as defined in section 2 of the Bank Holding Company Act of 1956 12 U. S.C. 1841 ) Start Printed Page 21028 (5) A savings and loan holding company (as defined in section 10 of the Home Owners Loan Act 12 U. S.C. 1467 a) (6) A corporation operating under the fifth undesignated paragraph of section 25 of the Federal Reserve Act (12 U. S.C. 603 ), commonly known as ldquoan agreement corporationrdquo and (7) A corporation organized under section 25A of the Federal Reserve Act (12 U. S.C. 611 et seq.), commonly known as an ldquoEdge Act corporation. rdquo (c) Commodity Exchange Act means the Commodity Exchange Act (7 U. S.C. 1 et seq. ). (d) Eligible contract participant has the same meaning as in the Commodity Exchange Act (7 U. S.C. 1 et seq., as implemented in 17 CFR 1.3 (m). (e) Forex means foreign exchange. (f) Identified banking product has the same meaning as in section 401(b) of the Legal Certainty for Bank Products Act of 2000 (7 U. S.C. 27 (b)). (g) Institution-affiliated party or IAP has the same meaning as in 12 U. S.C. 1813 (u)(1), (2), or (3). (h) Introducing broker means any person who solicits or accepts orders from a retail forex customer in connection with retail forex transactions. (i) Related person, when used in reference to a retail forex counterparty, means: (1) Any general partner, officer, director, or owner of ten percent or more of the capital stock of the retail forex counterparty (2) An associated person or employee of the retail forex counterparty, if the retail forex counterparty is not an insured depository institution (3) An IAP, if the retail forex counterparty is an insured depository institution and (4) Any relative or spouse of any of the foregoing persons, or any relative of such spouse, who shares the same home as any of the foregoing persons. (j) Retail foreign exchange dealer means any person other than a retail forex customer that is, or that offers to be, the counterparty to a retail forex transaction, except for a person described in item (aa), (bb), (cc)(AA), (dd), or (ff) of section 2(c)(2)(B)(i)(II) of the Commodity Exchange Act (7 U. S.C. 2 (c)(2)(B)(i)(II)). (k) Retail forex account means the account of a retail forex customer, established with a banking institution, in which retail forex transactions with the banking institution as counterparty are undertaken, or the account of a retail forex customer that is established in order to enter into such transactions. (l) Retail forex account agreement means the contractual agreement between a banking institution and a retail forex customer that contains the terms governing the customers retail forex account with the banking institution. (m) Retail forex business means engaging in one or more retail forex transactions with the intent to derive income from those transactions, either directly or indirectly. (n) Retail forex counterparty includes, as appropriate: (1) A banking institution (2) A retail foreign exchange dealer (3) A futures commission merchant (4) An affiliated person of a futures commission merchant and (5) A broker or dealer registered under section 15(b) (except paragraph (11) thereof) or 15C of the Securities Exchange Act of 1934 (15 U. S.C. 78 o(b), 78o-5) or a U. S. financial institution other than a banking institution, provided the counterparty is subject to a rule or regulation of a Federal regulatory agency covering retail forex transactions. (o) Retail forex customer means a customer that is not an eligible contract participant, acting on his, her, or its own behalf and engaging in retail forex transactions. (p) Retail forex proprietary account means a retail forex account carried on the books of a banking institution for one of the following persons a retail forex account of which 10 percent or more is owned by one of the following persons or a retail forex account of which an aggregate of 10 percent or more of which is owned by more than one of the following persons: (1) The banking institution (2) An officer, director or owner of ten percent or more of the capital stock of the banking institution or (3) An employee of the banking institution, whose duties include: (i) The management of the banking institutions business (ii) The handling of the banking institutions retail forex transactions (iii) The keeping of records, including without limitation the software used to make or maintain those records, pertaining to the banking institutions retail forex transactions or (iv) The signing or co-signing of checks or drafts on behalf of the banking institution (4) A spouse or minor dependent living in the same household as of any of the foregoing persons or (5) An affiliate of the banking institution (q) Retail forex transaction means an agreement, contract, or transaction in foreign currency, other than an identified banking product or a part of an identified banking product, that is offered or entered into by a banking institution with a person that is not an eligible contract participant and that is: (1) A contract of sale of a commodity for future delivery or an option on such a contract or (2) An option, other than an option executed or traded on a national securities exchange registered pursuant to section 6(a) of the Securities Exchange Act of 1934 (15 U. S.C. 78 f(a)) or (3) Offered or entered into on a leveraged or margined basis, or financed by a banking institution, its affiliate, or any person acting in concert with the banking institution or its affiliate on a similar basis, other than: (i) A security that is not a security futures product as defined in section 1a(47) of the Commodity Exchange Act (7 U. S.C. 1 a(47)) or (ii) A contract of sale thatmdash (A) Results in actual delivery within two days or (B) Creates an enforceable obligation to deliver between a seller and buyer that have the ability to deliver and accept delivery, respectively, in connection with their line of business or (iii) An agreement, contract, or transaction that the Board determines is not functionally or economically similar to an agreement, contract, or transaction described in paragraph (p)(1) or (p)(2) of this section. (a) Fraudulent conduct prohibited. No banking institution or its related persons may, directly or indirectly, in or in connection with any retail forex transaction: (1) Cheat or defraud or attempt to cheat or defraud any person (2) Knowingly make or cause to be made to any person any false report or statement or cause to be entered for any person any false record or (3) Knowingly deceive or attempt to deceive any person by any means whatsoever. (b) Acting as counterparty and exercising discretion prohibited. A banking institution that has authority to cause retail forex transactions to be effected for a retail forex customer without the retail forex customers specific authorization may not (and an affiliate of such an institution may not) act as the counterparty for any retail forex transaction with that retail forex customer. (a) Notification required. Before commencing a retail forex business, a Start Printed Page 21029 banking institution shall provide the Board with prior written notice in compliance with this section. The notice will become effective 60 days after a complete notice is received by the Board, provided the Board does not request additional information or object in writing. In the event the Board requests additional information, the notice will become effective 60 days after all information requested by the Board is received by the Board unless the Board objects in writing. (b) Notification requirements. A banking institution shall provide the following in its written notification: (1) Information concerning customer due diligence, including without limitation credit evaluations, customer appropriateness, and ldquoknow your customerrdquo documentation (2) The haircuts to be applied to noncash margin as provided in 240.9(b)(2) (3) Information concerning new product approvals (4) Information on addressing conflicts of interest and (5) A resolution by the banking institutions Board of Directors that the banking institution has established and implemented written policies, procedures, and risk measurement and management systems and controls for the purpose of ensuring that it conducts retail forex transactions in a safe and sound manner and in compliance with this part. (c) Treatment of existing retail forex businesses. A banking institution that is engaged in a retail forex business on the effective date of this part may continue to do so, until and unless the Board objects in writing, so long as the institution submits the information required to be submitted under paragraphs (b)(1) through (5) of this section within 30 days of the effective date of this part, subject to an extension of time by the Board, and such additional information as requested by the Board thereafter. (d) Compliance with the Commodity Exchange Act. A banking institution that is engaged in a retail forex business on the effective date of this part and complies with paragraph (c) of this section shall be deemed to be acting pursuant to a rule or regulation described in section 2(c)(2)(E)(ii)(I) of the Commodity Exchange Act (7 U. S.C. 2 (c)(2)(E)(ii)(I)). Application and closing out of offsetting long and short positions. (a) Application of purchases and sales. Any banking institution thatmdash (1) Engages in a retail forex transaction involving the purchase of any currency for the account of any retail forex customer when the account of such retail forex customer at the time of such purchase has an open retail forex transaction for the sale of the same currency (2) Engages in a retail forex transaction involving the sale of any currency for the account of any retail forex customer when the account of such retail forex customer at the time of such sale has an open retail forex transaction for the purchase of the same currency (3) Purchases a put or call option involving foreign currency for the account of any retail forex customer when the account of such retail forex customer at the time of such purchase has a short put or call option position with the same underlying currency, strike price, and expiration date as that purchased or (4) Sells a put or call option involving foreign currency for the account of any retail forex customer when the account of such retail forex customer at the time of such sale has a long put or call option position with the same underlying currency, strike price, and expiration date as that sold shall: (i) Immediately apply such purchase or sale against such previously held opposite transaction with the same customer and (ii) Promptly furnish such retail forex customer with a statement showing the financial result of the transactions involved and the name of any introducing broker to the account. (b) Close-out against oldest open position. In all instances in which the short or long position in a customers retail forex account immediately prior to an offsetting purchase or sale is greater than the quantity purchased or sold, the banking institution shall apply such offsetting purchase or sale to the oldest portion of the previously held short or long position. (c) Transactions to be applied as directed by customer. Notwithstanding paragraphs (a) and (b) of this section, the offsetting transaction shall be applied as directed by a retail forex customers specific instructions. These instructions may not be made by the banking institution or a related person. (a) Risk disclosure statement required. No banking institution may open or maintain an account for a retail forex customer for the purpose of engaging in retail forex transactions unless the banking institution has furnished the retail forex customer with a separate written disclosure statement containing only the language set forth in paragraph (d) of this section and the disclosures required by paragraphs (e), (f), and (g) of this section. (b) Acknowledgement of risk disclosure statement required. The banking institution must receive from the retail forex customer a written acknowledgement signed and dated by the customer that the customer received and understood the written disclosure statement required by paragraph (a) of this section. (c) Placement of risk disclosure statement. The disclosure statement may be attached to other documents as the initial page(s) of such documents and as the only material on such page(s). (d) Content of risk disclosure statement. The language set forth in the written disclosure statement required by paragraph (a) of this section shall be as follows: Risk Disclosure Statement Retail forex transactions generally involve the leveraged trading of contracts denominated in foreign currency with a banking institution as your counterparty. Because of the leverage and the other risks disclosed here, you can rapidly lose all of the funds or property you give the banking institution as margin for such trading and you may lose more than you pledge as margin. You should be aware of and carefully consider the following points before determining whether such trading is appropriate for you. (1) Trading foreign currencies is a not on a regulated market or exchangemdashyour banking institution is your trading counterparty and has conflicting interests. The retail forex transaction you are entering into is not conducted on an interbank market, nor is it conducted on a futures exchange subject to regulation by the Commodity Futures Trading Commission. The foreign currency trades you transact are trades with your banking institution as the counterparty. When you sell, the banking institution is the buyer. When you buy, the banking institution is the seller. As a result, when you lose money trading, your banking institution is making money on such trades, in addition to any fees, commissions, or spreads the banking institution may charge. (2) Any electronic trading platform that you may use for retail foreign currency transactions with your banking institution is not a regulated exchange. It is an electronic connection for accessing your banking institution. The terms of availability of such a platform are governed only by your contract with your banking institution. Any trading platform that you may use to enter into off-exchange foreign currency transactions is only connected to your banking institution. You are accessing that trading platform only to transact with your banking institution. You are not trading with any other entities or customers of the banking institution by accessing such platform. The availability and operation of any such platform, including the consequences of the unavailability of the Start Printed Page 21030 trading platform for any reason, is governed only by the terms of your account agreement with the banking institution. (3) You may be able to offset or liquidate any trading positions only through your banking institution because the transactions are not made on an exchange, and your banking institution may set its own prices. Your ability to close your transactions or offset positions is limited to what your banking institution will offer to you, as there is no other market for these transactions. Your banking institution may offer any prices it wishes. Your banking institution may establish its prices by offering spreads from third party prices, but it is under no obligation to do so or to continue to do so. Your banking institution may offer different prices to different customers at any point in time on its own terms. The terms of your account agreement alone govern the obligations your banking institution has to you to offer prices and offer offset or liquidating transactions in your account and make any payments to you. The prices offered by your banking institution may or may not reflect prices available elsewhere at any exchange, interbank, or other market for foreign currency. (4) Paid solicitors may have undisclosed conflicts. The banking institution may compensate introducing brokers for introducing your account in ways that are not disclosed to you. Such paid solicitors are not required to have, and may not have, any special expertise in trading, and may have conflicts of interest based on the method by which they are compensated. You should thoroughly investigate the manner in which all such solicitors are compensated and be very cautious in granting any person or entity authority to trade on your behalf. You should always consider obtaining dated written confirmation of any information you are relying on from your banking institution in making any trading or account decisions. (5) Retail forex transactions are not insured by the Federal Deposit Insurance Corporation. (6) Retail forex transactions are not a deposit in, or guaranteed by, a banking institution. (7) Retail forex transactions are subject to investment risks, including possible loss of all amounts invested. Finally, you should thoroughly investigate any statements by any banking institution that minimize the importance of, or contradict, any of the terms of this risk disclosure. Such statements may indicate sales fraud. This brief statement cannot, of course, disclose all the risks and other aspects of trading off-exchange foreign currency with a banking institution. I hereby acknowledge that I have received and understood this risk disclosure statement. Signature of Customer (e)(1) Disclosure of profitable accounts ratio. Immediately following the language set forth in paragraph (d) of this section, the statement required by paragraph (a) of this section shall include, for each of the most recent four calendar quarters during which the banking institution maintained retail forex customer accounts: (i) The total number of retail forex customer accounts maintained by the banking institution over which the banking institution does not exercise investment discretion (ii) The percentage of such accounts that were profitable for retail forex customer accounts during the quarter and (iii) The percentage of such accounts that were not profitable for retail forex customer accounts during the quarter. (2) Statement of profitable trades. (i) The banking institutions statement of profitable trades shall include the following legend: Past performance is not necessarily indicative of future results. (ii) Each banking institution shall provide, upon request, to any retail forex customer or prospective retail forex customer the total number of retail forex accounts maintained by the banking institution for which the banking institution does not exercise investment discretion, the percentage of such accounts that were profitable, and the percentage of such accounts that were not profitable for each calendar quarter during the most recent five-year period during which the banking institution maintained such accounts. (f) Disclosure of fees and other charges. Immediately following the language required by paragraph (e) of this section, the statement required by paragraph (a) of this section shall include: (1) The amount of any fee, charge, spread, or commission that the banking institution may impose on the retail forex customer in connection with a retail forex account or retail forex transaction (2) An explanation of how the banking institution will determine the amount of such fees, charges, spreads, or commissions and (3) The circumstances under which the banking institution may impose such fees, charges, spreads, or commissions. (g) Set-off. Immediately following the language required by paragraph (f) of this section, the statement required by paragraph (a) of this section shall include: (1) A statement as to whether the banking institution will or will not retain the right to set off obligations of the retail forex customer arising from the customers retail forex transactions, including margin calls and losses, against the customers other assets held by the banking institution (2) If the banking institution states that it reserves its right to set off obligations of the retail forex customer arising from the customers retail forex transactions against the customers other assets, the banking institution must receive from the retail forex customer a written acknowledgement signed and dated by the customer that the customer received and understood the written disclosure required by paragraph (g)(1) of this section. (h) Future disclosure requirements. If, with regard to a retail forex customer, the banking institution changes any fee, charge, or commission required to be disclosed under paragraph (f) of this section, then the banking institution shall mail or deliver to the retail forex customer a notice of the changes at least 15 days prior to the effective date of the change. (i) Form of disclosure requirements. The disclosures required by this section shall be clear and conspicuous and designed to call attention to the nature and significance of the information provided. (j) Other disclosure requirements unaffected. This section does not relieve a banking institution from any other disclosure obligation it may have under applicable law. (a) General rule. A banking institution engaging in retail forex transactions shall keep full, complete and systematic records, together with all pertinent data and memoranda, of all transactions relating to its retail forex business, including: (1) Retail forex account records. For each retail forex account: (i) The name and address of the person for whom such retail forex account is carried or introduced and the principal occupation or business of the person (ii) The name of any other person guaranteeing the account or exercising trading control with respect to the account (iii) The establishment or termination of the account (iv) A means to identify the person who has solicited and is responsible for the account or assign account numbers in such a manner as to identify that person (v) The funds in the account, net of any commissions and fees (vi) The accounts net profits and losses on open trades (vii) The funds in the account plus or minus the net profits and losses on open trades, adjusted for the net option value in the case of open options positions Start Printed Page 21031 (viii) Financial ledger records that show separately for each retail forex customer all charges against and credits to such retail forex customers account, including but not limited to retail forex customer funds deposited, withdrawn, or transferred, and charges or credits resulting from losses or gains on closed transactions and (ix) A list of all retail forex transactions executed for the account, with the details specified in paragraph (a)(2) of this section. (2) Retail forex transaction records. For each retail forex transaction: (i) The date and time the banking institution received the order (ii) The price at which the banking institution placed the order, or, in the case of an option, the premium that the retail forex customer paid (iii) The customer account identification information (iv) The currency pair (v) The size or quantity of the order (vi) Whether the order was a buy or sell order (vii) The type of order, if the order was not a market order (viii) The size and price at which the order is executed, or in the case of an option, the amount of the premium paid for each option purchased, or the amount credited for each option sold (ix) For options, whether the option is a put or call, expiration date, quantity, underlying contract for future delivery or underlying physical, strike price, and details of the purchase price of the option, including premium, mark-up, commission, and fees (x) For futures, the delivery date and (xi) If the order was made on a trading platform: (A) The price quoted on the trading platform when the order was placed, or, in the case of an option, the premium quoted (B) The date and time the order was transmitted to the trading platform and (C) The date and time the order was executed. (3) Price changes on a trading platform. If a trading platform is used, daily logs showing each price change on the platform, the time of the change to the nearest second, and the trading volume at that time and price. (4) Methods or algorithms. Any method or algorithm used to determine the bid or asked price for any retail forex transaction or the prices at which customers orders are executed, including, but not limited to, any mark-ups, fees, commissions or other items which affect the profitability or risk of loss of a retail forex customers transaction. (5) Daily records which show for each business day complete details of: (i) All retail forex transactions that are futures transactions executed on that day, including the date, price, quantity, market, currency pair, delivery date, and the person for whom such transaction was made (ii) All retail forex transactions that are option transactions executed on that day, including the date, whether the transaction involved a put or call, the expiration date, quantity, currency pair, delivery date, strike price, details of the purchase price of the option, including premium, mark-up, commission and fees, and the person for whom the transaction was made and (iii) All other retail forex transactions executed on that day for such account, including the date, price, quantity, currency and the person for whom such transaction was made. (6) Other records. Written acknowledgements of receipt of the risk disclosure statement required by sectthinsp240.6(b), offset instructions pursuant to sectthinsp240.5(c), records required under paragraphs (b) through (f) of this section, trading cards, signature cards, street books, journals, ledgers, payment records, copies of statements of purchase, and all other records, data and memoranda that have been prepared in the course of the banking institutions retail forex business. (b) Ratio of profitable accounts. (1) With respect to its active retail forex customer accounts over which it did not exercise investment discretion and that are not retail forex proprietary accounts open for any period of time during the quarter, a banking institution shall prepare and maintain on a quarterly basis (calendar quarter): (i) A calculation of the percentage of such accounts that were profitable (ii) A calculation of the percentage of such accounts that were not profitable and (iii) Data supporting the calculations described in paragraphs (b)(1)(i) and (b)(1)(ii) of this section. (2) In calculating whether a retail forex account was profitable or not profitable during the quarter, the banking institution shall compute the realized and unrealized gains or losses on all retail forex transactions carried in the retail forex account at any time during the quarter, and subtract all fees, commissions, and any other charges posted to the retail forex account during the quarter, and add any interest income and other income or rebates credited to the retail forex account during the quarter. All deposits and withdrawals of funds made by the retail forex customer during the quarter must be excluded from the computation of whether the retail forex account was profitable or not profitable during the quarter. Computations that result in a zero or negative number shall be considered a retail forex account that was not profitable. Computations that result in a positive number shall be considered a retail forex account that was profitable. (3) A retail forex account shall be considered ldquoactiverdquo for purposes of paragraph (b)(1) of this section if and only if, for the relevant calendar quarter, a retail forex transaction was executed in that account or the retail forex account contained an open position resulting from a retail forex transaction. (c) Records related to possible violations of law. A banking institution engaging in retail forex transactions shall make a record of all communications received by the banking institution or its related persons concerning facts giving rise to possible violations of law related to the banking institutions retail forex business. The record shall contain: the name of the complainant, if provided the date of the communication the relevant agreement, contract, or transaction the substance of the communication and the name of the person who received the communication and the final disposition of the matter. (d) Records for noncash margin. A banking institution shall maintain a record of all noncash margin collected pursuant to sectthinsp240.9. The record shall show separately for each retail forex customer: (1) A description of the securities or property received (2) The name and address of such retail forex customer (3) The dates when the securities or property were received (4) The identity of the depositories or other places where such securities or property are segregated or held, if applicable (5) The dates on which the banking institution placed or removed such securities or property into or from such depositories and (6) The dates of return of such securities or property to such retail forex customer, or other disposition thereof, together with the facts and circumstances of such other disposition. (e) Order tickets. (1) Except as provided in paragraph (e)(2) of this section, immediately upon the receipt of a retail forex transaction order, a banking institution shall prepare an order ticket for the order (whether unfulfilled, executed or canceled). The order ticket shall include: (i) Account identification (account or customer name with which the retail forex transaction was effected) Start Printed Page 21032 (ii) Order number (iii) Type of order (market order, limit order, or subject to special instructions) (iv) Date and time, to the nearest minute, the retail forex transaction order was received (as evidenced by timestamp or other timing device) (v) Time, to the nearest minute, the retail forex transaction order was executed and (vi) Price at which the retail forex transaction was executed. (2) Post-execution allocation of bunched orders. Specific identifiers for retail forex accounts included in bunched orders need not be recorded at time of order placement or upon report of execution as required under paragraph (e)(1) of this section if the following requirements are met: (i) The banking institution placing and directing the allocation of an order eligible for post-execution allocation has been granted written investment discretion with regard to participating customer accounts and makes the following information available to customers upon request: (A) The general nature of the post-execution allocation methodology the banking institution will use (B) Whether the banking institution has any interest in accounts which may be included with customer accounts in bunched orders eligible for post-execution allocation and (C) Summary or composite data sufficient for that customer to compare the customers results with those of other comparable customers and, if applicable, any account in which the banking institution has an interest. (ii) Post-execution allocations are made as soon as practicable after the entire transaction is executed (iii) Post-execution allocations are fair and equitable, with no account or group of accounts receiving consistently favorable or unfavorable treatment and (iv) The post-execution allocation methodology is sufficiently objective and specific to permit the Board to verify fairness of the allocations using that methodology. (f) Record of monthly statements and confirmations. A banking institution shall retain a copy of each monthly statement and confirmation required by sectthinsp240.10. (g) Form of record and manner of maintenance. The records required by this section must clearly and accurately reflect the information required and provide an adequate basis for the audit of the information. A banking institution must create and maintain audio recordings of oral orders and oral offset instructions. Record maintenance may include the use of automated or electronic records provided that the records are easily retrievable, and readily available for inspection. (h) Length of maintenance. A banking institution shall keep each record required by this section for at least five years from the date the record is created. (a) Capital required for a state member bank. A banking institution defined in section 240.2(b)(1) offering or entering into retail forex transactions must be well-capitalized as defined in section 208.43 of Regulation H (12 CFR 208.43 ). (b) Capital required for an uninsured state-licensed branch of a foreign bank. A banking institution defined in sectthinsp240.2(b)(2) offering or entering into retail forex transactions must be well-capitalized under the capital rules made applicable to it pursuant to sectthinsp225.2(r)(3) of Regulation Y (12 CFR 225.2 (r)(3)). (c) Capital required for financial holding companies and bank holding companies. A banking institution defined in sectthinsp240.2(b)(3) or (4) offering or entering into retail forex transactions must be well-capitalized as defined in sectthinsp225.2(r) of Regulation Y (12 CFR 225.2 (r)). (d) Capital required for savings and loan holding companies. A banking institution defined in sectthinsp240.2(b)(5) offering or entering into retail forex transactions must be well-capitalized as defined in sectthinsp238.2(s) of Regulation LL (12 CFR 238.2 (s)). (e) Capital required for an agreement corporation or Edge Act corporation. A banking institution defined in sectthinsp240.2(b)(6) or (7) offering or entering into retail forex transactions must maintain capital in compliance with the capital adequacy guidelines that are made applicable to an Edge corporation engaged in banking pursuant to sectthinsp211.12 (c)(2) of Regulation K (12 CFR 211.12 (c)(2)). (a) Margin required. A banking institution engaging, or offering to engage, in retail forex transactions must collect from each retail forex customer an amount of margin not less than: (1) Two percent of the notional value of the retail forex transaction for major currency pairs and 5 percent of the notional value of the retail forex transaction for all other currency pairs (2) For short options, 2 percent for major currency pairs and 5 percent for all other currency pairs of the notional value of the retail forex transaction, plus the premium received by the retail forex customer or (3) For long options, the full premium charged and received by the banking institution. (b)(1) Form of margin. Margin collected under paragraph (a) of this section or pledged by a retail forex customer for retail forex transactions in excess of the requirements of paragraph (a) of this section must be in the form of cash or the following financial instruments: (i) Obligations of the United States and obligations fully guaranteed as to principal and interest by the United States (ii) General obligations of any State or of any political subdivision thereof (iii) General obligations issued or guaranteed by any enterprise, as defined in 12 U. S.C. 4502 (10) (iv) Certificates of deposit issued by an insured depository institution, as defined in section 3(c)(2) of the Federal Deposit Insurance Act (12 U. S.C. 1813 (c)(2)) (v) Commercial paper (vi) Corporate notes or bonds (vii) General obligations of a sovereign nation (viii) Interests in money market mutual funds and (ix) Such other financial instruments as the Board deems appropriate. (2) Haircuts. A banking institution shall establish written policies and procedures that include: (i) Haircuts for noncash margin collected under this section and (ii) Annual evaluation, and, if appropriate, modification of the haircuts. (c) Major currencies. (1) for the purposes of paragraphs (a)(1) and (a)(2) of this section, major currency means: (i) United States Dollar (USD) (ii) Canadian Dollar (CAD) (iv) United Kingdom Pound (GBP) (v) Japanese Yen (JPY) (vi) Swiss Franc (CHF) (vii) New Zealand Dollar (NZD) (viii) Australian Dollar (AUD) (ix) Swedish Kronor (SEK) (x) Danish Kroner (DKK) (xi) Norwegian Krone (NOK), and (xii) Any other currency as determined by the Board. (d) Margin calls liquidation of position. For each retail forex customer, at least once per day, a banking institution shall: (1) Mark the value of the retail forex customers open retail forex positions to market (2) Mark the value of the margin collected under this section from the retail forex customer to market (3) Determine whether, based on the marks in paragraphs (d)(1) and (d)(2) of Start Printed Page 21033 this section, the banking institution has collected margin from the retail forex customer sufficient to satisfy the requirements of this section and (4) If, pursuant to paragraph (d)(3) of this section, the banking institution determines that it has not collected margin from the retail forex customer sufficient to satisfy the requirements of this section then, within a reasonable period of time, the banking institution shall either: (i) Collect margin from the retail forex customer sufficient to satisfy the requirements of this section or (ii) Liquidate the retail forex customers retail forex transactions. Required reporting to customers. (a) Monthly statements. Each banking institution must promptly furnish to each retail forex customer, as of the close of the last business day of each month or as of any regular monthly date selected, except for accounts in which there are neither open positions at the end of the statement period nor any changes to the account balance since the prior statement period, but in any event not less frequently than once every three months, a statement that clearly shows: (1) For each retail forex customer: (i) The open retail forex transactions with prices at which acquired (ii) The net unrealized profits or losses in all open retail forex transactions marked to the market (iii) Any money, securities or other property held as margin for retail forex transactions and (iv) A detailed accounting of all financial charges and credits to the retail forex customers retail forex accounts during the monthly reporting period, including: money, securities, or property received from or disbursed to such customer realized profits and losses and fees, charges, and commissions. (2) For each retail forex customer engaging in retail forex transactions that are options: (i) All such options purchased, sold, exercised, or expired during the monthly reporting period, identified by underlying retail forex transaction or underlying currency, strike price, transaction date, and expiration date (ii) The open option positions carried for such customer and arising as of the end of the monthly reporting period, identified by underlying retail forex transaction or underlying currency, strike price, transaction date, and expiration date (iii) All such option positions marked to the market and the amount each position is in the money, if any (iv) Any money, securities or other property held as margin for retail forex transactions and (v) A detailed accounting of all financial charges and credits to the retail forex customers retail forex accounts during the monthly reporting period, including: money, securities, or property received from or disbursed to such customer realized profits and losses premiums and mark-ups and fees, charges, and commissions. (b) Confirmation statement. Each banking institution must, not later than the next business day after any retail forex transaction, send: (1) To each retail forex customer, a written confirmation of each retail forex transaction caused to be executed by it for the customer, including offsetting transactions executed during the same business day and the rollover of an open retail forex transaction to the next business day (2) To each retail forex customer engaging in forex option transactions, a written confirmation of each forex option transaction, containing at least the following information: (i) The retail forex customers account identification number (ii) A separate listing of the actual amount of the premium, as well as each mark-up thereon, if applicable, and all other commissions, costs, fees and other charges incurred in connection with the forex option transaction (iii) The strike price (iv) The underlying retail forex transaction or underlying currency (v) The final exercise date of the forex option purchased or sold and (vi) The date the forex option transaction was executed. (3) To each retail forex customer engaging in forex option transactions, upon the expiration or exercise of any option, a written confirmation statement thereof, which statement shall include the date of such occurrence, a description of the option involved, and, in the case of exercise, the details of the retail forex or physical currency position which resulted therefrom including, if applicable, the final trading date of the retail forex transaction underlying the option. (c) Notwithstanding the provisions of paragraphs (b)(1) through (3) of this section, a retail forex transaction that is caused to be executed for a pooled investment vehicle that engages in retail forex transactions need be confirmed only to the operator of such pooled investment vehicle. (d) Controlled accounts. With respect to any account controlled by any person other than the retail forex customer for whom such account is carried, each banking institution shall promptly furnish in writing to such other person the information required by paragraphs (a) and (b) of this section. (e) Introduced accounts. Each statement provided pursuant to the provisions of this section must, if applicable, show that the account for which the banking institution was introduced by an introducing broker and the name of the introducing broker. (a) No implication or representation of limiting losses. No banking institution engaged in retail foreign exchange transactions or its related persons may imply or represent that it will, with respect to any retail customer forex account, for or on behalf of any person: (1) Guarantee such person or account against loss (2) Limit the loss of such person or account or (3) Not call for or attempt to collect margin as established for retail forex customers. (b) No implication of representation of engaging in prohibited acts. No banking institution or its related persons may in any way imply or represent that it will engage in any of the acts or practices described in paragraph (a) of this section. (c) No Federal government endorsement. No banking institution or its related persons may represent or imply in any manner whatsoever that any retail forex transaction or retail forex product has been sponsored, recommended, or approved by the Board, the Federal government, or any agency thereof. (d) Assuming or sharing of liability from bank error. This section shall not be construed to prevent a banking institution from assuming or sharing in the losses resulting from the banking institutions error or mishandling of a retail forex transaction. (e) Certain guaranties unaffected. This section shall not affect any guarantee entered into prior to the effective date of this part, but this section shall apply to any extension, modification or renewal thereof entered into after such date. Authorization to trade. (a) Specific authorization required. No banking institution may directly or indirectly effect a retail forex transaction for the account of any retail forex customer unless, before the transaction occurs, the retail forex customer specifically authorized the banking institution to effect the retail forex transaction. (b) A retail forex transaction is ldquospecifically authorizedrdquo for purposes Start Printed Page 21034 of this section if the retail forex customer specifies: (1) The precise retail forex transaction to be effected (2) The exact amount of the foreign currency to be purchased or sold and (3) In the case of an option, the identity of the foreign currency or contract that underlies the option. Trading and operational standards. (a) Internal rules, procedures, and controls required. A banking institution engaging in retail forex transactions shall establish and implement internal rules, procedures, and controls designed, at a minimum, to: (1) Ensure, to the extent reasonable, that each order received from a retail forex customer that is executable at or near the price that the banking institution has quoted to the customer is entered for execution before any order in any retail forex transaction for: (i) A proprietary account (ii) An account in which a related person has an interest, or any account for which such a related person may originate orders without the prior specific consent of the account owner, if the related person has gained knowledge of the retail forex customers order prior to the transmission of an order for a proprietary account (iii) An account in which a related person has an interest, if the related person has gained knowledge of the retail forex customers order prior to the transmission of an order for a proprietary account or (iv) An account in which a related person may originate orders without the prior specific consent of the account owner, if the related person has gained knowledge of the retail forex customers order prior to the transmission of an order for a proprietary account (2) Prevent banking institution related persons from placing orders, directly or indirectly, with another person in a manner designed to circumvent the provisions of paragraph (a)(1) of this section and (3) Fairly and objectively establish settlement prices for retail forex transactions. (b) Disclosure of retail forex transactions. No banking institution engaging in retail forex transactions may disclose that an order of another person is being held by the banking institution, unless the disclosure is necessary to the effective execution of such order or the disclosure is made at the request of the Board. (c) Handling of retail forex accounts of related persons of retail forex counterparties. No banking institution engaging in retail forex transactions shall knowingly handle the retail forex account of any related person of another retail forex counterparty unless the banking institution: (1) Receives written authorization from a person designated by such other retail forex counterparty with responsibility for the surveillance over such account (2) Prepares immediately upon receipt of an order for the account a written record of the order, including the account identification and order number, and records thereon to the nearest minute, by time-stamp or other timing device, the date and time the order is received and (3) Transmits on a regular basis to the other retail forex counterparty copies of all statements for the account and of all written records prepared upon the receipt of orders for the account pursuant to paragraph (c)(2) of this section. (d) Related person of banking institution establishing account at another retail forex counterparty. No related person of a banking institution working in the banking institutions retail forex business may have an account, directly or indirectly, with another retail forex counterparty unless the other retail forex counterparty: (1) Receives written authorization to open and maintain the account from a person designated by the banking institution of which it is a related person with responsibility for the surveillance over the account pursuant to paragraph (a)(2) of this section (2) Prepares immediately upon receipt of an order for the account a written record of the order, including the account identification and order number, and records thereon to the nearest minute, by time-stamp or other timing device, the date and time the order is received and (3) Transmits on a regular basis to the banking institution copies of all statements for the account and of all written records prepared by the other retail forex counterparty upon receipt of orders for such account pursuant to paragraph (d)(2) of this section. (e) Prohibited trading practices. No banking institution engaging in retail forex transactions may: (1) Enter into a retail forex transaction, to be executed pursuant to a market or limit order at a price that is not at or near the price at which other retail forex customers, during that same time period, have executed retail forex transactions with the banking institution (2) Adjust or alter prices for a retail forex transaction after the transaction has been confirmed to the retail forex customer (3) Provide a retail forex customer a new bid price for a retail forex transaction that is higher than its previous bid without providing a new asked price that is also higher than its previous asked price by a similar amount (4) Provide a retail forex customer a new bid price for a retail forex transaction that is lower than its previous bid without providing a new asked price that is also lower than its previous asked price by a similar amount or (5) Establish a new position for a retail forex customer (except one that offsets an existing position for that retail forex customer) where the banking institution holds outstanding orders of other retail forex customers for the same currency pair at a comparable price. (a) Supervision by the banking institution. A banking institution engaging in retail forex transactions shall diligently supervise the handling by its officers, employees, and agents (or persons occupying a similar status or performing a similar function) of all retail forex accounts carried, operated, or advised by the banking institution and all activities of its officers, employees, and agents (or persons occupying a similar status or performing a similar function) relating to its retail forex business. (b) Supervision by officers, employees, or agents. An officer, employee, or agent of a banking institution must diligently supervise his or her subordinates handling of all retail forex accounts at the banking institution and all the subordinates activities relating to the banking institutions retail forex business. Notice of transfers. (a) Prior notice generally required. Except as provided in paragraph (b) of this section, a banking institution must provide a retail forex customer with 30 days prior notice of any assignment of any position or transfer of any account of the retail forex customer. The notice must include a statement that the retail forex customer is not required to accept the proposed assignment or transfer and may direct the banking institution to liquidate the positions of the retail forex customer or transfer the account to a retail forex counterparty of the retail forex customers selection. (b) Exceptions. The requirements of paragraph (a) of this section shall not apply to transfers: Start Printed Page 21035 (1) Requested by the retail forex customer (2) Made by the Federal Deposit Insurance Corporation as receiver or conservator under the Federal Deposit Insurance Act or other law or (3) Otherwise authorized by applicable law. (c) Obligations of transferee banking institution. A banking institution to which retail forex accounts or positions are assigned or transferred under paragraph (a) of this section must provide to the affected retail forex customers the risk disclosure statements and forms of acknowledgment required by this part and receive the required signed acknowledgments within sixty days of such assignments or transfers. This requirement shall not apply if the banking institution has clear written evidence that the retail forex customer has received and acknowledged receipt of the required disclosure statements. Customer dispute resolution. (a) No banking institution shall enter into any agreement or understanding with a retail forex customer in which the customer agrees, prior to the time a claim or grievance arises, to submit any claim or grievance regarding any retail forex transaction or disclosure to any settlement procedure. (b) Election of forum. (1) Within 10 business days after the receipt of notice from the retail forex customer that the customer intends to submit a claim to arbitration, the banking institution shall provide the customer with a list of persons qualified in dispute resolution. (2) The customer must, within 45 days after receipt of such list, notify the banking institution of the person selected. The customers failure to provide such notice shall give the banking institution the right to select a person from the list. (c) Enforceability. A dispute settlement procedure may require parties using the procedure to agree, under applicable state law, submission agreement, or otherwise, to be bound by an award rendered in the procedure if the agreement to submit the claim or grievance to the procedure was made after the claim or grievance arose. Any award so rendered by the procedure will be enforceable in accordance with applicable law. (d) Time limits for submission of claims. The dispute settlement procedure used by the parties may not include any unreasonably short limitation period foreclosing submission of a customers claims or grievances or counterclaims. (e) Counterclaims. A procedure for the settlement of a retail forex customers claims or grievances against a banking institution or employee thereof may permit the submission of a counterclaim in the procedure by a person against whom a claim or grievance is brought if the counterclaim: (1) Arises out of the transaction or occurrence that is the subject of the retail forex customers claim or grievance and (2) Does not require for adjudication the presence of essential witnesses, parties, or third persons over which the settlement process lacks jurisdiction. (f) Cross-border transactions. This section shall not apply to transactions within the scope of sections 202, 302, and 305 of the Federal Arbitration Act (9 U. S.C. 202. 302, and 305). Reservation of authority. The Board may modify the disclosure, recordkeeping, capital and margin, reporting, business conduct, documentation, or other standards or requirements under this part for a specific retail forex transaction or a class of retail forex transactions if the Board determines that the modification is consistent with safety and soundness and the protection of retail forex customers. End Part Start Signature By order of the Board of Governors of the Federal Reserve System, April 3, 2013. Margaret McCloskey Shanks, Deputy Secretary of the Board. End Signature End Supplemental Information 2. thinspDodd-Frank Act sectthinsp742(c)(2) (codified at 7 U. S.C. 2 (c)(2)(E) (2011). 3. thinspThe CEA defines ldquofinancial institutionrdquo to include an agreement corporation, an Edge Act corporation, a depository institution (as defined in section 3 of the Federal Deposit Insurance Act), a financial holding company (as defined in section 2 of the Bank Holding Company Act of 1956), a trust company, or ldquoa similarly regulated subsidiary or affiliate of an entityrdquo described above. 7 U. S.C. 1 a(21). 4. thinspFor purposes of the retail forex rules, ldquoFederal regulatory agencyrdquo includes ldquoan appropriate Federal banking agency. rdquo 7 U. S.C. 2 (c)(2)(E)(i)(III). The Board is an ldquoappropriate Federal banking agencyrdquo under the CEA. 7 U. S.C. 1 a(2). 5. thinspA retail customer is a person who is not an ldquoeligible contract participantrdquo under the CEA. See, 7 U. S.C. 1 a(18). 10. thinspThe Boards proposed rule did not explicitly cover savings and loan holding companies (SLHCs). They have been added to the regulation to reflect the transfer to the Board of regulatory responsibility for SLHCs on July 21, 2011. 11. thinsp Regulation of Off-Exchange Retail Foreign Exchange Transactions and Intermediaries, 75 FR 55409 (Sept. 10, 2010) (Final CFTC Retail Forex Rule). The CFTC proposed these rules prior to the enactment of the Dodd-Frank Act. Regulation of Off-Exchange Retail Foreign Exchange Transactions and Intermediaries, 75 FR 3281 (Jan. 20, 2010) (Proposed CFTC Retail Forex Rule). 13. thinsp7 U. S.C. 2 (c)(2)(E). The federal regulatory authorities other than the Board are the CFTC, OCC, FDIC, the Securities and Exchange Commission, the National Credit Union Association, and the Farm Credit Administration. 14. thinspThe definition of ldquoeligible contract participantrdquo is found in section 1a(18) of the CEA and is discussed below. 17. thinsp See generally, CFTC v. Intl Fin. Servs. (New York), Inc., 323 F. Supp. 2d 482, 495 (S. D.N. Y. 2004) (distinguishing between foreign exchange futures contracts and spot contracts in foreign exchange, and noting that foreign currency trades settled within two days are ordinarily spot transactions rather than futures contracts) see also Bank Brussels Lambert v. Intermetals Corp., 779 F. Supp. 741, 748 (S. D.N. Y. 1991). 18. thinsp See generally, CFTC v. Intl Fin. Servs. (New York), Inc., 323 F. Supp. 2d 482, 495 (S. D.N. Y. 2004) (distinguishing between forward contracts in foreign exchange and foreign exchange futures contracts) see also William L. Stein, The Exchange-Trading Requirement of the Commodity Exchange Act, 41 Vand. L. Rev. 473, 491 (1988). In contrast to forward contracts, futures contracts generally include several or all of the following characteristics: (i) Standardized nonnegotiable terms (other than price and quantity) (ii) parties are required to deposit initial margin to secure their obligations under the contract (iii) parties are obligated and entitled to pay or receive variation margin in the amount of gain or loss on the position periodically over the period the contract is outstanding (iv) purchasers and sellers are permitted to close out their positions by selling or purchasing offsetting contracts and (v) settlement may be provided for by either (a) cash payment through a clearing entity that acts as the counterparty to both sides of the contract without delivery of the underlying commodity or (b) physical delivery of the underlying commodity. See, Edward F. Greene et al. U. S. Regulation of International Securities and Derivatives Markets sectthinsp14.082 (8th ed. 2006). 20. thinsp CFTC v. Zelener, 373 F.3d 861 (7th Cir. 2004) see also CFTC v. Erskine, 512 F.3rd 309 (6th Cir. 2008). 21. thinspFor example, in Zelener, the retail forex dealer retained the right, at the date of delivery of the currency to deliver the currency, roll the transaction over, or offset all or a portion of the transaction with another open position held by the customer. See CFTC v. Zelener, 373 F.3d 861, 869 (7th Cir. 2004). 22. thinsp See, e. g. CFTC v. Erskine, 512 F.3d 309, 326 (6th Cir. 2008) CFTC v. Zelener, 373 F.3d 861, 869 (7th Cir. 2004). 23. thinspThe term ldquoeligible contract participantrdquo is defined at 7 U. S.C. 1 a(18) and generally requires a corporation, partnership, proprietorship, organization, trust or other entity to have total assets exceeding 10 million and an individual to have more than 10 million in assets invested on a discretionary basis. 24. thinsp Further Definition of ldquoSwap Dealer, rdquo ldquoSecurity-Based Swap Dealer, rdquo ldquoMajor Swap Participantrdquo and ldquoEligible Contract Participant, rdquo 75 FR 80174 (December 21, 2010)(joint proposed rule with the SEC). 35. thinsp See National Futures Association, Forex Transaction: A Regulatory Guide 17 (Feb. 2011) New York Federal Reserve Bank, Survey of North American Foreign Exchange Volume tbl. 3e (Jan. 2011) Bank for International Settlements, Report on Global Foreign Exchange Market Activity in 2010 at 15 tbl. B.6 (Dec. 2010). 36. thinspSee 17 CFR 166.5. The CFTCs regulation permits predispute dispute settlement agreements with a customer with certain restrictions such as that signing the agreement must not be made a condition for the customer to utilize the services offered by the CFTC registrant. 37. thinspConvention on the Recognition and Enforcement of Foreign Arbitral Awards (1970). 38. thinspInter-American Convention on International Commercial Arbitration (1990). 39. thinsp9 U. S.C. 1 ff. Chapter 2 of the FAA (secs. 201-208) contains provisions implementing the New York Convention, while Chapter 3 of the FAA (secs. 301mdash307) contains provisions implementing the Panama Convention. 40. thinsp See SR Letter 94-11 (Feb. 17, 1994) see also SR Letter 95-46 (Sept. 14, 1995). 41. thinspU. S. Small Business Administration, Table of Small Business Size Matched to North American Industry Classification System Codes, 13 CFR 121.201 . FR Doc. 2013-08163 Filed 4-8-13 8:45 am BILLING CODE 6210-01-PProposed Rule Retail Foreign Exchange Transactions Printed version: PDF Publication Date: 10/12/2012 Agencies: Office of the Comptroller of the Currency Dates: Comments must be received by November 13, 2012. Comments Close: 11/13/2012 Document Type: Proposed Rule Document Citation: 77 FR 62177 Page: 62177-62182 (6 pages) CFR: 12 CFR 48 Agency/Docket Number: Docket ID OCC-2012-0014 RIN: 1557-AD42 Document Number: 2012-25123 Document Details Enhanced Content Relevant information about this document from Regulations. gov provides additional context. This information is not part of the official Federal Register document. Enhanced Content - Document Tools These tools are designed to help you understand the official document better and aid in comparing the online edition to the print edition. These markup elements allow the user to see how the document follows the Document Drafting Handbook that agencies use to create their documents. These can be useful for better understanding how a document is structured but are not part of the published document itself. Enhanced Content - Document Tools Enhanced Content - Developer Tools The Office of the Comptroller of the Currency (OCC) is proposing to amend its retail foreign exchange rule for transactions with bank common trust funds, bank collective investment funds, and insurance company separate accounts and is making technical corrections to the rule. Comments must be received by November 13, 2012. FOR FURTHER INFORMATION CONTACT: Roman Goldstein, Senior Attorney, or Ted Dowd, Assistant Director, Securities and Corporate Practices Division, (202) 874-5210. ADDRESSES: Because paper mail in the Washington, DC, area and at the OCC is subject to delay, commenters are encouraged to submit comments by the Federal eRulemaking Portal or email, if possible. Please use the title ldquoRetail Foreign Exchange Transactionsrdquo to facilitate the organization and review of the comments. You may submit comments by any of the following methods: Federal eRulemaking Portal mdashldquoRegulations. govrdquo: Go to regulations. gov , under the ldquoMore Search Optionsrdquo tab click next to the ldquoAdvanced Docket Searchrdquo option where indicated, select ldquoComptroller of the Currencyrdquo from the agency drop-down menu, then click ldquoSubmit. rdquo In the ldquoDocket IDrdquo column, select ldquoOCC-2012-XXXXrdquo to submit or view public comments and to view supporting and related materials for this proposed rule. The ldquoHow to Use This Siterdquo link on the Regulations. gov home page provides information on using Regulations. gov, including instructions for submitting or viewing public comments, viewing other supporting and related materials, and viewing the docket after the close of the comment period. Email: regsmentsocc. treas. gov . Mail: Office of the Comptroller of the Currency, 250 E Street SW. Mail Stop 2-3, Washington, DC 20219. Fax: (202) 874-5274. Hand Delivery/Courier: 250 E Street SW. Mail Stop 2-3, Washington, DC 20219. Instructions: You must include ldquoOCCrdquo as the agency name and ldquoDocket Number OCC-2012-0014rdquo in your comment. In general, OCC will enter all comments received into the docket and publish them on the Regulations. gov Web site without change, including any business or personal information that you provide such as name and address information, email addresses, or phone numbers. Comments received, including attachments and other supporting materials, are part of the public record and subject to public disclosure. Do not enclose any information in your comment or supporting materials that you consider confidential or inappropriate for public disclosure. You may review comments and other related materials that pertain to this proposed rulemaking by any of the following methods: Viewing Comments Electronically: Go to regulations. gov , under the ldquoMore Search Optionsrdquo tab click next to the ldquoAdvanced Document Searchrdquo option where indicated, select ldquoComptroller of the Currencyrdquo from the agency drop-down menu, then click ldquoSubmit. rdquo In the ldquoDocket IDrdquo column, select ldquoOCC-2012-XXXXrdquo to view public comments for this rulemaking action. Viewing Comments Personally: You may personally inspect and photocopy comments at the OCC, 250 E Street SW. Washington, DC. For security reasons, the OCC requires that visitors make an appointment to inspect comments. You may do so by calling (202) 874-4700. Upon arrival, visitors will be required to present valid government-issued photo identification and submit to security screening in order to inspect and photocopy comments. Docket: You may also view or request available background documents and project summaries using the methods described above. SUPPLEMENTARY INFORMATION: I. Background A. OCCs Retail Foreign Exchange Rulemaking On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act). 1 As amended by the Dodd-Frank Act, the Commodity Exchange Act (CEA) provides that a United States financial institutionthinsp 2 for which there is a Federal regulatory agencythinsp 3 shall not enter into, or offer to enter into, a transaction described in section 2(c)(2)(B)(i)(I) of the CEA with a person that is not an eligible contract participantthinsp 4 except pursuant to a rule or regulation of a Federal regulatory agency allowing the transaction under such terms and conditions as the Federal regulatory agency shall prescribethinsp 5 (a retail foreign exchange (forex) rule). Transactions described in section 2(c)(2)(B)(i)(I) include foreign currency futures, options on foreign currency futures, and options on foreign currency (other than options executed or traded on a national securities exchange). 6 A Federal regulatory agencys retail forex rule must treat similarly all such futures and options and all agreements, contracts, or transactions that are functionally or economically similar to such futures and options. 7 Retail forex rules must prescribe appropriate requirements with respect to disclosure, recordkeeping, capital and margin, reporting, business conduct, documentation, and such other standards or requirements as the Federal regulatory agency determines to be necessary. 8 The OCC issued a final retail forex rule on July 14, 2011, which became effective on July 15, 2011. 9 On September 12, 2011, the OCC issued an interim final rule applying the retail forex rule to Federal savings associations on the same terms as national banks. 10 B. Definition of Eligible Contract Participant The CEA distinguishes retail customers from non-retail customers through the term eligible contract participant (ECP). 11 In many cases, the CEA provides fewer protections to ECPs than retail customers, i. e., non-ECPs. For example, retail forex rules do not apply to transactions with ECPs and ECPs may enter into off-exchange swaps. 12 A person can qualify as an ECP by satisfying the requirements of one of the terms 14 prongs. Two of the prongs are relevant here: the prong for commodity pools and the prong for business entities. Prior to enactment of the Dodd-Frank Act, a commodity poolthinsp 13 was an ECP if it (i) had total assets exceeding 5 million and (ii) was formed and operated by a person subject to regulation under the CEA or by a foreign person performing a similar role or function subject to foreign regulation. 14 The Dodd-Frank Act added a proviso to the second condition, which has become known as the retail forex look-through: for purposes of CEA sectionsthinsp 15 that provide the U. S. Commodity Futures Trading Commission (CFTC) with jurisdiction over certain accounts and pooled investment vehicles trading in retail forex, a commodity pool is not an ECP unless all of its participants are ECPs. 16 Also prior to the Dodd-Frank Act, a corporation, partnership, proprietorship, organization, trust, or other business entity that had total assets exceeding 10 million was an ECP. 17 The Dodd-Frank Act left this provision unmodified. Many private investment vehicles, including certain commodity pools, availed themselves of this provision to be ECPs. 18 On December 21, 2010, the CFTC and the U. S. Securities and Exchange Commission (SEC) jointly proposed a rule, as required by the Dodd-Frank Act, 19 to further define eligible contract participant. 20 The CFTC and SEC proposed to implement the retail forex look-through by excluding, for purposes of CEA section 2(c)(2)(B)(vi) and (C)(vii), a commodity pool with one or more direct or indirect participants that is not an ECP from the definition of eligible contract participant. The CFTC and SEC also proposed to prohibit a commodity pool from qualifying as an ECP as a business entity unless it had total assets exceeding 5 million and was operated by a person subject to regulation under the CEA. 21 The CFTC and SEC reasoned that allowing commodity pools to qualify as ECPs solely by having assets exceeding 10 million (as the test for business entities requires) would frustrate Congress intent to subject commodity pools to the retail forex look-through. 22 On April 18, 2012, the CFTC and SEC issued a final rule further defining eligible contract participant. 23 The definition took effect on July 23, 2012, except for certain provisions related to commodity pools, which take effect on December 31, 2012. The rule adopted a prohibition on a commodity pool qualifying as an ECP under the business entity prongthinsp 24 of the ECP definition solely by having assets exceeding 10 million. 25 The final rule differed from the proposal in three material respects. First, the retail forex look-through generally only applies to a commodity pool that directly enters into a retail forex transaction. A commodity pool is not subject to the retail forex look-through simply because it invests in another commodity pool that enters into retail forex transactions. 26 (However, the retail forex look-through does apply to a commodity pool structured to evade subtitle A of Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act by permitting non-ECPs to participate in retail forex transactions. 27 ) For example, in a master/feeder fund structure in which the master fund enters into retail forex transactions, one would look through the master fund to the feeder fund but generally not through the feeder fund to its investors. Second, the final rule provides that, notwithstanding the look-through, a commodity pool is an ECP for retail forex purposes if it (i) is not formed for the purpose of evading regulation under the CFTCs retail forex regime, (ii) has total assets exceeding 10 million, and (iii) is formed and operated by a registered commodity pool operator (CPO)thinsp 28 or by a CPO exempt from registration under 17 CFR 4.13 (a)(3). 29 Third, the rule applies the retail forex look-through only to the ECP prong for commodity pools and business entitiesmdashnot to the other prongs. 30 At the meeting adopting the final rule further defining eligible contract participant, the CFTC acknowledged that it was unclear if bank funds were ECPs. 31 II. Overview of Proposed Amendments to the OCCs Retail Forex Rule A. Treatment of Bank Funds and Insurance Company Separate Accounts A bank fund is a bank-administered trust that holds commingled assets that meet specific criteria established by OCC regulation. 32 The bank acts as a fiduciary for the bank fund and holds legal title to the funds assets, but the funds participants are the beneficial owners of the funds assets. While each participant owns an undivided interest in the aggregate assets of the bank fund, a participant does not directly own any specific asset held by the fund nor does a participant hold any certificate or other document representing an interest in the fund. 33 Insurance company separate accounts share structural features with bank funds: they are not separate legal entities they are not subject to claims from general creditors of the insurance company and they divorce legal title to the assets from beneficial ownership. 34 The legal structure of these funds presents interpretive challenges under the eligible contract participant definition. For this reason, the OCC wishes to provide clarity regarding how its retail forex rules will apply to transactions with these funds. The OCC preliminarily believes that treating bank funds as traditional retail customers for purposes of the retail forex rule is not appropriate. It is only bank funds status as quasi-distinct from the bank that creates this regulatory uncertainty: were bank funds clearly identical to the bank, they would be ECPs as banks were bank funds separate legal entities, they would be ECPs as bank subsidiaries or affiliates. 35 The definition of eligible contract participant contains a list of entities substantively regulated under the CEA or other regulatory schemesmdashbanks, insurance companies, investment companies, pension plans, registered broker-dealers, and futures commission merchantsmdashsuggesting that Congress did not see a need to further regulate already-regulated entities. Bank funds should be treated the same because they too are subject to substantive regulation. 36 Congress did not subject registered investment companies and similarly-regulated foreign entities to the retail forex rulesthinsp 37 despite the fact that these companies cater to retail investors and are offered publicly, unlike bank funds. 38 Imposing the retail forex rules requirements on forex transactions between Federal depository institutions and bank funds is inconsistent with the treatment of registered investment companies and similarly regulated foreign entities and creates unwarranted regulatory burden. The disparate treatment creates competitive inequalities that Congress may not have intended. 39 Moreover, the new definition of eligible contract participant creates a paradoxical result: The retail forex rule will apply to transactions with funds that are prudentially regulatedmdashbank funds and insurance company separate accountsmdashbut not to transactions with funds that are not prudentially regulatedmdashhedge funds. Hedge funds will qualify as ECPs under new 17 CFR 1.3 (m)(8) because they generally (i) have assets exceeding 10 million and (ii) are operated by registered CPOs or CPOs exempt from registration. CFTC regulations, however, provide that banks and insurance companies are not CPOs when they manage bank funds and separate accounts, respectively. 40 The CPO exclusion comes from the U. S. Senate Committee on Agriculture, Nutrition, and Forestry, which directed the CFTC to exclude from the definition of commodity pool operator banks acting in a fiduciary capacity, ERISA plans and their fiduciaries, registered investment companies, and insurance companies. 41 The rationale was that these entities do not need to be regulated under the CEA as CPOs because they are already regulated under other law. 42 It would be counterintuitive for regulatory reliefmdashnamely, the CPO exclusion for banks and insurance companiesmdashto increase regulatory burden on these funds. The CEA requires the OCC to prescribe appropriate requirements in its retail forex rulesthinsp 43 and affords the OCC with flexibility to tailor the requirements of its retail forex rule for certain classes of transactions. The OCC wrote its retail forex rule with individual consumers in mind and prescribed requirements that it deemed appropriate for retail forex transactions with individual consumers. The further definition of eligible contract participant raises the issue of how the retail forex rule should apply to entities that are materially different from individual consumers but that are, nonetheless, not ECPs. The OCC preliminarily believes it appropriate to modify the requirements of the retail forex rule for retail forex transactions between Federal depository institutionsthinsp 44 and bank funds. The OCC proposes to apply to these transactions only the rules antifraud and general provisions, sections 48.1, 48.2, 48.3(a), and 48.17. The OCC preliminarily believes that the same requirements should apply to retail forex transactions between Federal depository institutions and insurance company separate accounts because the CFTCs CPO exclusions treat them equivalently. See proposed sectthinsp48.1(e). In connection with this proposed modification, the OCC proposes to exclude retail forex transactions with bank funds and insurance company separate accounts from the profitability calculations required by sectthinsp48.7(b). That paragraph requires Federal depository institutions to calculate the percentage of retail forex accounts that are profitable and the percentage of retail forex accounts that are not profitable. The OCC is concerned that these ratios would be less informative to individual consumers of the realistic prospects of profitability if they included trades entered into by sophisticated customers like bank funds and insurance company separate accounts. B. Adoption of CFTC and SEC Interpretations The OCC proposes to adopt the further definition of eligible contract participant in 17 CFR 1.3 (m). 45 One of the OCCs objectives in promulgating its retail forex rule was ensuring regulatory comparability among retail forex counterparties. To that end, the OCC modeled its rule on the CFTCs. The OCC believes that adopting the further definition of eligible contract participant promotes regulatory comparability. The CFTC and SEC rule further defining eligible contract participant contained two statutory interpretations regarding retail forex. First, the CFTC and SEC interpreted certain foreign funds to be ECPs for purposes of the retail forex rule. 46 Second, the CFTC and SEC explained that retail forex counterparties may rely (if reasonable) on a customers written representation that it is an ECP. 47 The OCC believes that the considerations that led the CFTC and SEC to consider certain foreign funds to be ECPs for purposes of the retail forex look-throughthinsp 48 are equally applicable to the OCCs retail forex rule. The OCC therefore proposes to exempt from many of the retail forex rules requirements retail forex transactions between a Federal depository institution and a foreign fund operated and managed by a foreign person and whose participants are foreign investors. These transactions will remain subject to applicable foreign law. In addition, a Federal depository institution must still obtain a supervisory non-objection to begin a retail forex business, even with foreign funds. See proposed sectthinsp48.1(d)(2). The OCC also believes that a Federal depository institution should not be deemed in violation of the retail forex rule if it inadvertently violated one of the rules requirements because it reasonably believed its counterparty was an ECP, bank fund, or insurance company separate account. Proposed sectthinsp48.18 provides a safe harbor for this situation. To rely on this safe harbor, a Federal depository institution must: have reasonable policies and procedures to verify the customers status follow these policies and procedures and obtain a written representation from the counterparty that it is an ECP, bank fund, or insurance company separate account. Reliance on that representation must be reasonable. For this purpose, reliance would be reasonable if the representation specifies its status categorymdashe. g. an investment company, a natural person with discretionary investments exceeding 10 million, a bank fundmdashunless the Federal depository institution has information that would cause a reasonable person to question the representation. C. Additional Proposed Changes The OCC also proposes to make additional clarifying and conforming changes to the retail forex rule. First, the OCC proposes to clarify the capital requirements applicable to Federal branches and agencies of foreign banks that offer or enter into retail forex transactions. The current retail forex rule requires these Federal branches and agencies to be well capitalized under 12 CFR part 6. However, part 6 only applies to insured Federal branches and agencies. 49 The OCC proposes to amend the capital requirements in sectthinsp48.8 so that all Federal branches and agencies offering or entering into retail forex transactions must satisfy the requirements of 12 CFR 4.7 (b)(1)(iii)(A) and (iv). 50 For purposes of determining whether a Federal branch or agency complies with these requirements, the Federal branch or agency would have to calculate capital ratios consistent with 12 CFR part 3. 51 The well capitalized requirement would continue to apply to insured Federal branches. Second, the OCC proposes to revise the retail forex rules prohibition on self dealing in 12 CFR 48.3 (b) to be consistent with the CFTCs retail forex rule. 52 The CFTCs rule prohibits a person from entering into a retail forex transaction for an account over which it or its affiliate has investment discretion. The OCCs retail forex rule, however, prohibits a national bank or its affiliate from entering into a retail forex transaction with a customer if the national bank (but not its affiliate) has investment discretion over that customers account. The OCC does not intend to regulate the conduct of national bank affiliates, which are subject to other agencies retail forex rules. 53 Furthermore, the OCC believes it is inappropriate for a Federal depository institution to act as the counterparty for a retail forex transaction that its affiliate entered into using its investment discretion over a customers account. Third, the OCC proposes to clarify that instruments that Congress or the CFTC have excluded from regulation under the CEAthinsp 54 are not retail forex transactions. Because these instruments are excluded from regulation under the CEA, section 2(c)(2)(E) of the CEA, which prohibits retail forex transactions except under a retail forex rule, does not apply to them. Because this amendment refers to transactions that are already excluded from regulation under the CEA, it would simply clarify how the OCCs retail forex rule interacts with established law. Finally, the OCC proposes a technical correction to a citation contained in the definition of retail forex transaction. D. Interim Final Rule for Federal Savings Associations On September 12, 2011, the OCC published an interim final rule amending part 48 to allow Federal savings associations to engage in retail forex transactions on the same terms as national banks. 55 The interim final rule requested comment, by November 14, 2011, on the application of the existing rule to Federal savings associations. The OCC received no comments on the interim final rule. The OCC plans to finalize the interim final rule, as published, at the same time as it finalizes the changes proposed in this NPR. III. Request for Comment on the Proposed Rule The OCC requests comments on all aspects of this proposed rule, including the following specific questions. Question 1. Does the alternative treatment proposed for retail forex transactions with bank funds and insurance company separate accounts appropriately address those transactions If not, please explain why not and describe the additional requirements the OCC should impose on transactions with bank funds and insurance company separate accounts. Please explain why those requirements are appropriate for transactions with bank funds and insurance company separate accounts but not for transactions with commodity pools that are ECPs under the CFTCs further definition. 56 Question 2. Is the proposed definition of bank fund in sectthinsp48.2 appropriate If not, how should it be defined Do any bank funds not fall within the definition Are there any bank funds that are not directly or indirectly subject to 12 CFR 9.18. such as a bank fund of a state bank If so, how are those funds regulated Question 3. Is the proposed definition of insurance company separate account in sectthinsp48.2 appropriate If not, how should it be defined Question 4. Is the exclusion of transactions with bank funds and insurance company separate accounts from the profitability calculations appropriate If not, why not What proportion of Federal depository institutions forex trading is with bank funds or insurance company separate accounts Question 5. Should the OCCs retail forex rule adopt the CFTCs and SECs further definition of eligible contract participant . Why or why not Is the definition of eligible contract participant proposed in section 48.2 appropriate Question 6. Should the OCCs retail forex rule adopt the CFTCs and SECs interpretation regarding how to treat foreign funds under the retail forex look-through Why or why not Is proposed sectthinsp48.1(d) an appropriate implementation of this interpretation Why or why not Does this approach properly construe the extraterritorial reach of CEA section 2(c)(2)(E) Why or why not Question 7. Should the OCC adopt the CFTCs and SECs approach to verifying ECP status Why or why not Is proposed sectthinsp48.18 an appropriate implementation of this approach Why or why not IV. Regulatory Analysis A. Paperwork Reduction Act Under the Paperwork Reduction Act, 57 the OCC may not conduct or sponsor, and a person is not required to respond to, an information collection unless the information collection displays a valid Office of Management and Budget (OMB) control number. The amendments in this notice of proposed rulemaking do not introduce any new collections of information into the rules, nor do they amend the rules in a way that modifies the collection of information that OMB has previously approved for part 48. 58 Therefore, no Paperwork Reduction Act submission to OMB is required. B. Regulatory Flexibility Act Analysis Under section 605(b) of the Regulatory Flexibility Act, the regulatory flexibility analysis otherwise required under section 604 of the Regulatory Flexibility Act is not required if an agency certifies that the rule will not have a significant economic impact on a substantial number of small entities and publishes its certification and a short explanatory statement in the Federal Register along with its rule. The OCC supervises 772 small entities. 59 This proposal could affect approximately two of those small entities. The OCC estimates the cost to those small entities would be de minimis. Therefore, the OCC certifies that the rule will not have a significant economic impact on a substantial number of small entities. C. Unfunded Mandates Reform Act Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law 104-4 requires that an agency prepare a budgetary impact statement before promulgating a rule that includes a Federal mandate that may result in the expenditure by state, local, and tribal governments, in the aggregate, or by the private sector of 146 million or more in any one year. If a budgetary impact statement is required, section 205 of the Unfunded Mandates Reform Act also requires an agency to identify and consider a reasonable number of regulatory alternatives before promulgating a rule. The OCC has determined that its proposed rule would not result in expenditures by state, local, and tribal governments, or by the private sector, of 146 million or more. Accordingly, the OCC has not prepared a budgetary impact statement or specifically addressed the regulatory alternatives considered. List of Subjects in 12 CFR Part 48 For the reasons stated in the preamble, the OCC proposes to amend 12 CFR part 48 as follows: PART 48mdashRETAIL FOREX TRANSACTIONS 1. The authority citation for part 48 continues to read as follows: Authority: 7 U. S.C. 27 et seq. 12 U. S.C. 1 et seq., 24, 93a, 161, 1461 et seq., 1462a, 1463, 1464, 1813(q), 1818, 1831o, 3101 et seq., 3102, 3106a, 3108, and 5412. 2. Amend sectthinsp48.1 by revising paragraphs (c) and (d) and adding paragraph (e) to read as follows: Authority, purpose, and scope. (c) Scope. Except as provided in this section, this part applies to national banks. (d) International applicability. (1) Foreign transactions. Sections 48.3 and 48.5 through 48.16 do not apply to retail foreign exchange transactions between a foreign branch of a national bank and a non-U. S. person. (2) Foreign funds. For purposes of paragraph (d)(1) of this section, a fund is a non-U. S. person if it is operated and managed by a non-U. S. person and all of its participants are non-U. S. persons. For purposes of this paragraph, if a participant is a fund, then the participant is a non-U. S. person only if all of its participants are non-U. S. persons. (3) Applicability of foreign law. Transactions described in this paragraph (d) and foreign branches of national banks remain subject to applicable foreign law, including any disclosure, recordkeeping, capital, margin, reporting, business conduct, and documentation requirements. (e) Transactions with qualified forex customers. Sections 48.3(b) and 48.4 through 48.16 do not apply to retail foreign exchange transactions between a national bank and a qualified forex customer. 3. Amend sectthinsp48.2 by: a. In the introductory text, remove the phrase ldquoeligible contract participantrdquo b. Remove the definition of identified banking product c. Amend the definition of retail forex transaction by: i. Removing, in the introductory text, ldquoother than an identified banking product or a part of an identified banking productrdquo and adding in its place ldquoother than an excluded instrument or a part of an excluded instrumentrdquo and ii. Removing, in paragraphs (2) and (3)(iii)(B), the phrase ldquo15 U. S.C. 78 (f)(a)rdquo and adding in its place the phrase ldquo15 U. S.C. 78 f(a)rdquo and d. Add the definitions for ldquoBank fund, rdquo ldquoEligible contract participant, rdquo ldquoExcluded instrument, rdquo ldquoInsurance company separate account, rdquo ldquo Insured branch, rdquo and ldquoQualified forex customerrdquo in alphabetical order. The additions read as follows: Bank fund means a fund described in 12 CFR 9.18 (a)(1), (a)(2), or (c) that is subject to applicable requirements of 12 CFR 9.18 . Eligible contract participant has the same meaning as in 17 CFR 1.3 (m). Excluded instrument means an agreement, contract, or transaction that is exempt from regulation under the Commodity Exchange Act, including: (1) An identified banking product, as defined in section 402(b) of the Legal Certainty for Bank Products Act of 2000 (7 U. S.C. 27 (b)) (2) A banking product described in section 405(a) of the Legal Certainty for Bank Products Act of 2000 (7 U. S.C. 27 c(a)) (3) A hybrid instrument that is predominantly a security under section 2(f) of the Commodity Exchange Act (7 U. S.C. 2 (f)) and (4) A hybrid instrument that is exempt from the provisions of the Commodity Exchange Act under 17 CFR 34.3 (a). Insurance company separate account means a separate account established and maintained by an insurance company subject to regulation by a State insurance regulator or foreign insurance regulator. Insured branch has the same meaning as in section 3(s)(3) of the Federal Deposit Insurance Act (12 U. S.C. 1813 (s)(3)). Qualified forex customer means a bank fund or an insurance company separate account. 4. Revise sectthinsp48.3(b) to read as follows: (b) If a national bank or an affiliate can cause retail forex transactions to be effected for a retail forex customer without the retail forex customers specific authorization, then the national bank may not act as the counterparty for any retail forex transaction with that retail forex customer. 5. Revise the introductory text of sectthinsp48.7(b)(1) to read as follows: (1) With respect to its active retail forex customer accounts over which it did not exercise investment discretion (other than retail forex proprietary accounts open for any period of time during the quarter or accounts belonging to a qualified forex customer), a national bank must prepare and maintain on a quarterly basis (calendar quarter): 6. Revise sectthinsp48.8 to read as follows: (a) A national bank, other than a Federal branch or agency of a foreign bank that is not an insured branch, offering or entering into retail forex transactions must be well capitalized under 12 CFR part 6 . (b) A Federal branch or agency of a foreign bank offering or entering into retail forex transactions must satisfy the requirements of 12 CFR 4.7 (b)(1)(iii)(A) and (iv). 7. Add sectthinsp48.18 to read as follows: The OCC will not deem a national bank to have violated this part by engaging in a retail forex transaction without complying with this parts requirements if: (a) The national banks counterparty represented in writing that it was an eligible contract participant or a qualified forex customer (b) The national bank reasonably relied on that representation (c) The national bank had reasonable policies and procedures in place to verify the counterpartys status as an eligible contract participant or a qualified forex customer and (d) The national bank followed those policies and procedures. Dated: October 5, 2012. Comptroller of the Currency. 2. thinspThe CEA defines financial institution as including a depository institution (as defined in section 3 of the Federal Deposit Insurance Act (12 U. S.C. 1813 )). 7 U. S.C. 1 a(21)(E). National banks, Federal savings associations, and Federal branches and agencies of foreign banks are depository institutions under the Federal Deposit Insurance Act. 3. thinspFor purposes of the retail forex rules, Federal regulatory agency includes an appropriate Federal banking agency. 7 U. S.C. 2 (c)(2)(E)(i)(III). The OCC is the appropriate Federal banking agency for national banks, Federal savings associations, and Federal branches and agencies of foreign banks. See 7 U. S.C. 1 a(2) 12 U. S.C. 1813 (q)(1), 5411-12. 28. thinspA CPO is any person engaged in a business that is of the nature of a commodity pool, investment trust, syndicate, or similar form of enterprise, and who, in connection therewith, solicits, accepts, or receives from others funds, securities, or property, either directly or through capital contributions, the sale of stock or other forms of securities, or otherwise, for the purpose of trading in commodity interests, including futures, swaps, retail forex, and commodity options. 7 U. S.C. 1 a(11). In general, CPOs must register with the CFTC. 7 U. S.C. 6 m(1). 29. thinspThe registration exemption under 17 CFR 4.13 (a)(3) applies to private funds with de minimis commodity positions. See Commodity Pool Operators and Commodity Trading Advisors: Compliance Obligations, 77 FR 11252. 11261-63 (Feb. 24, 2012). 30. thinsp See Swap Entities and ECPs, 77 FR 30596. 30651 amp n.640 (May 23, 2012). 31. thinsp See CFTC, Open Meeting on the 26th Series of Rulemakings Under Dodd-Frank Act (Apr. 18, 2012), transcript available at cftc. gov/ucm/groups/public/swaps/documents/dfsubmission/dfsubmission2041812-trans. pdf (colloquy between Commissioner Sommers and CFTC staff on p. 80 of the transcript). 34. thinspThe status of separate accounts as commodity pools is unclear. Commodity Pool Operators, 50 FR 15868, 15872 (Apr. 23, 1985) (ldquoThe devoting of assets to commodity interest trading by an insurance company separate account could constitute the operation of a commodity pool. rdquo) 36. thinsp See, e. g., 12 U. S.C. 92 a 12 CFR 9.18. National banks bank funds are subject to 12 CFR 9.18. State banks bank funds may be subject to 12 CFR 9.18 because of the Internal Revenue Code, 26 U. S.C. 584 (a)(2), or because of state law. State banks bank funds may also be subject to state laws specifically regulating common trust funds and collective investment funds, such as the Michigan Collective Investment Funds Act, M. C.L. sectthinsp550.101 et seq. 38. thinsp See 15 U. S.C. 80 a-3(c)(3) (requiring bank common trust funds to be created and maintained for fiduciary purposes and generally forbidding advertising common trust funds or offering them for sale to the general public) 15 U. S.C. 80 a-3(c)(11) (requiring bank collective investment funds to consist solely of assets of employee stock bonus, pension, or profit-sharing trusts or governmental plans). 39. thinsp See 15 U. S.C. 8302 (instructing the CFTC and SEC, in adopting rules and orders defining eligible contract participant, to treat functionally or economically similar entities in a similar manner) S. Rep. No. 384, at 79-80 (1982) (directing the CFTC to exempt from the definition of CPO banks acting in a fiduciary capacity, ERISA plans and their fiduciaries, insurance companies, and registered investment companies). 40. thinsp17 CFR 4.5 (a)(3). But see 7 U. S.C. 1 A(11)(A)(ii) (defining commodity pool operator to include any person registered as a CPO with the CFTC). 41. thinspS. Rep. No. 384, at 79-80 (1982) see also id. (stating that registered investment companies, insurance companies, and banks and trust companies acting in a fiduciary capacity are not within the intent of the term commodity pool operator ) Commodity Pool Operators, 50 FR 15868, 15868-69 (Apr. 23, 1985) (quoting S. Rep. No. 384). 42. thinsp See S. Rep. No. 384 at 79-80 (1982). The CFTC originally proposed to exempt banks operating bank funds and insurance companies operating separate accounts from all of the requirements applicable to CPOs. The CFTC reasoned that these banks and insurance companies were sufficiently regulated under other regulatory schemes to warrant their complete exemption. Commodity Pool Operators and Commodity Trading Advisors, 49 FR 4778, 4783 (Feb. 8, 1984). The CFTC ultimately concluded that it was appropriate to provide relief even more extensive than it proposed: it created an exclusion from the definition of CPO for these banks and insurance companies. Commodity Pool Operators, 50 FR 15868 (Apr. 23, 1985). 44. thinsp Federal depository institution means a national bank, a Federal savings association, or Federal branch of a foreign bank. 12 U. S.C. 1813 (c)(2). In this proposal, it also includes a Federal agency of a foreign bank. 45. thinspThe definition in 17 CFR 1.3 (m) incorporates the statutory definition of eligible contract participant. The retail forex rules definition of eligible contract participant therefore includes persons the CFTC has determined are ECPs. See 7 U. S.C. 1 A(18)(C). 46. thinspSwap Entities and ECPs, 77 FR 30596 30654 (May 23, 2012).

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