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

Page 136 TITLE 7—AGRICULTURE § 21 (Sept. 21, 1922, ch. 369, § 16, as added Pub. L. 93–463, title IV, § 414, Oct. 23, 1974, 88 Stat. 1414; amended Pub. L. 97–444, title II, § 232, Jan. 11, 1983, 96 Stat. 2320; Pub. L. 106–554, § 1(a)(5) [title II, § 251(e)], Dec. 21, 2000, 114 Stat. 2763, 2763A–443.) Editorial Notes AMENDMENTS 2000—Subsec. (e). Pub. L. 106–554 added subsec. (e). 1983—Subsec. (d). Pub. L. 97–444 prohibited disclosure of market positions. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1983 AMENDMENT Amendment by Pub. L. 97–444 effective Jan. 11, 1983, see section 239 of Pub. L. 97–444, set out as a note under section 2 of this title. EFFECTIVE DATE For effective date of section, see section 418 of Pub. L. 93–463, set out as an Effective Date of 1974 Amend- ment note under section 2 of this title. STUDY OF TRADING IN CATTLE FUTURES CONTRACTS Pub. L. 99–641, title I, § 111, Nov. 10, 1986, 100 Stat. 3561, provided that: ‘‘(a) STUDY.—The Comptroller General of the United States shall conduct and complete a comprehensive study of the effect of trading in contracts for the future delivery of live cattle on the cash market price of live cattle, with particular emphasis on— ‘‘(1) whether the reaction of the live cattle futures market to the results of the milk production termi- nation program in March 1986, conducted under sec- tion 201(d)(3) of the Agricultural Act of 1949 (7 U.S.C. 1446(d)(3)), was based on and accurately reflected the then prevailing conditions of supply and demand; ‘‘(2) the effect of the trading in contracts for the fu- ture delivery of live cattle on— ‘‘(i) the price relationship between feeder cattle and fed cattle; ‘‘(ii) the price discovery process with respect to live cattle; and ‘‘(iii) price competition within the cattle indus- try; ‘‘(3) the effect of the use of packer contracts, as a means of obtaining slaughter cattle, on the increase in short hedging in contracts for the future delivery of live cattle and the effect of this increase in short hedging on prices in the futures and cash markets; ‘‘(4) the effect on the ability of the cash markets to accurately reflect prevailing conditions of supply and demand if packer contracts become the prevalent method of marketing fed cattle; ‘‘(5) whether the present delivery system for con- tracts for the future delivery of live cattle creates any bias (either upward or downward) in the cash price for cattle; ‘‘(6) whether the present delivery system for con- tracts for the future delivery of live cattle creates price volatility during the delivery month; and ‘‘(7) whether there are advantages or disadvantages to a cash settlement system in lieu of the present de- livery system in the case of contracts for the future delivery of live cattle. ‘‘(b) REPORTS.— ‘‘(1) PRELIMINARY REPORT.—Not later than January 15, 1987, the Comptroller General shall submit a pre- liminary report on the results of the study required under subsection (a) to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Sen- ate. ‘‘(2) FINAL REPORT.—Not later than 1 year after the date of enactment of this Act [Nov. 10, 1986], the Comptroller General shall submit to such committees a detailed final report of the results of the study re- quired under subsection (a).’’ POTATO FUTURES STUDY; SUBMISSION OF REPORT TO CONGRESS Pub. L. 95–405, § 27, Sept. 30, 1978, 92 Stat. 877, re- quired, within one year of Oct. 1, 1978, Secretary of Ag- riculture to (1) conduct a comprehensive study of mar- keting of Irish potatoes and of making and trading of contracts of sale for future delivery of Irish potatoes, including rules and regulations pertaining to such trad- ing issued by Commodity Futures Trading Commission or any contract market designated by Commission; and (2) submit to each House of Congress a detailed report on results of such study, and that report should also in- clude any proposals Secretary may have concerning any legislation needed to implement such recommenda- tions and concerning any modifications and rules and regulations needed to improve regulation of such con- tracts by Commission or any contract market des- ignated by Commission. § 21. Registered futures associations (a) Registration statement Any association of persons may be registered with the Commission as a registered futures as- sociation pursuant to subsection (b) of this sec- tion, under the terms and conditions hereinafter provided in this section, by filing with the Com- mission for review and approval a registration statement in such form as the Commission may prescribe, setting forth the information, and ac- companied by the documents, below specified: (1) Data as to its organization, membership, and rules of procedure, and such other infor- mation as the Commission may by rules and regulations require as necessary or appro- priate in the public interest; and (2) Copies of its constitution, charter, or ar- ticles of incorporation or association, with all amendments thereto, and of its bylaws, and of any rules or instruments corresponding to the foregoing, whatever the name, hereinafter in this section collectively referred to as the ‘‘rules of the association’’. (b) Standards for registration; Commission find- ings An applicant association shall not be reg- istered as a futures association unless the Com- mission finds, under standards established by the Commission, that— (1) such association is in the public interest and that it will be able to comply with the provisions of this section and the rules and regulations thereunder and to carry out the purposes of this section; (2) the rules of the association provide that any person registered under this chapter, reg- istered entity, or any other person designated pursuant to the rules of the Commission as el- igible for membership may become a member of such association, except such as are ex- cluded pursuant to paragraph (3) or (4) of this subsection, or a rule of the association per- mitted under this subparagraph. The rules of the association may restrict membership in such association on such specified basis relat- ing to the type of business done by its mem- bers, or on such other specified and appro- priate basis, as appears to the Commission to be necessary or appropriate in the public in- Page 137 TITLE 7—AGRICULTURE § 21 terest and to carryout the purpose of this sec- tion. Rules adopted by the association may provide that the association may, unless the Commission directs otherwise in cases in which the Commission finds it appropriate in the public interest so to direct, deny admis- sion to, or refuse to continue in such associa- tion any person if (i) such person, whether prior or subsequent to becoming registered as such, or (ii) any person associated within the meaning of ‘‘associated person’’ as set forth in section 6k of this title, whether prior or subse- quent to becoming so associated, has been and is suspended or expelled from a registered en- tity or has been and is barred or suspended from being associated with all members of such registered entity, for violation of any rule of such registered entity; (3) the rules of the association provide that, except with the approval or at the direction of the Commission in cases in which the Commis- sion finds it appropriate in the public interest so to approve or direct, no person shall be ad- mitted to or continued in membership in such association, if such person— (A) has been and is suspended or expelled from a registered futures association or from a registered entity or has been and is barred or suspended from being associated with all members of such association or from being associated with all members of such reg- istered entity, for violation of any rule of such association or registered entity which prohibits any act or transaction consti- tuting conduct inconsistent with just and equitable principles of trade, or requires any act the omission of which constitutes con- duct inconsistent with just and equitable principles of trade; (B) is subject to an order of the Commis- sion denying, suspending, or revoking his registration pursuant to section 9 of this title, or expelling or suspending him from membership in a registered futures associa- tion or a registered entity, or barring or sus- pending him from being associated with a fu- tures commission merchant; (C) whether prior or subsequent to becom- ing a member, by his conduct while associ- ated with a member, was a cause of any sus- pension, expulsion, or order of the character described in clause (A) or (B) which is in ef- fect with respect to such member, and in en- tering such a suspension, expulsion, or order, the Commission or any such registered enti- ty or association shall have jurisdiction to determine whether or not any person was a cause thereof; or (D) has associated with him any person who is known, or in the exercise of reason- able care should be known, to him to be a person who would be ineligible for admission to or continuance in membership under clause (A), (B), or (C) of this paragraph; (4) the rules of the association provide that, except with the approval or at the direction of the Commission in cases in which the Commis- sion finds it appropriate in the public interest so to approve or direct, no person shall become a member and no natural person shall become a person associated with a member, unless such person is qualified to become a member or a person associated with a member in con- formity with specified and appropriate stand- ards with respect to the training, experience, and such other qualifications of such person as the association finds necessary or desirable, and in the case of a member, the financial re- sponsibility of such a member. For the pur- pose of defining such standards and the appli- cation thereof, such rules may— (A) appropriately classify prospective members (taking into account relevant mat- ters, including type or nature of business done) and persons proposed to be associated with members; (B) specify that all or any portion of such standard shall be applicable to any such class; (C) require persons in any such class to pass examinations prescribed in accordance with such rules; (D) provide that persons in any such class other than prospective members and part- ners, officers and supervisory employees (which latter term may be defined by such rules and as so defined shall include branch managers of members) of members, may be qualified solely on the basis of compliance with specified standards of training and such other qualifications as the association finds appropriate; (E) provide that applications to become a member or a person associated with a mem- ber shall set forth such facts as the associa- tion may prescribe as to the training, expe- rience, and other qualifications (including, in the case of an applicant for membership, financial responsibility) of the applicant and that the association shall adopt procedures for verification of qualifications of the appli- cant, which may require the applicant to be fingerprinted and to submit, or cause to be submitted, such fingerprints to the Attorney General for identification and appropriate processing. Notwithstanding any other pro- vision of law, such an association may re- ceive from the Attorney General all the re- sults of such identification and processing; and (F) require any class of persons associated with a member to be registered with the as- sociation in accordance with procedures specified by such rules (and any application or document supplemental thereto required by such rules of a person seeking to be reg- istered with such association shall, for the purposes of section 9 of this title, be deemed an application required to be filed under this section); (5) the rules of the association assure a fair representation of its members in the adoption of any rule of the association or amendment thereto, the selection of its officers and direc- tors, and in all other phases of the administra- tion of its affairs; (6) the rules of the association provide for the equitable allocation of dues among its members, to defray reasonable expenses of ad- ministration; (7) the rules of the association are designed to prevent fraudulent and manipulative acts Page 138 TITLE 7—AGRICULTURE § 21 1 So in original. The semicolon probably should be a period. 2 So in original. The word ‘‘and’’ probably should not appear. 3 So in original. The period probably should be a semicolon. 4 So in original. No subpar. (B) has been enacted. 5 So in original. The period probably should be ‘‘; and’’. 6 So in original. Probably should not be capitalized. and practices, to promote just and equitable principles of trade, in general, to protect the public interest, and to remove impediments to and perfect the mechanism of free and open fu- tures trading; (8) the rules of the association provide that its members and persons associated with its members shall be appropriately disciplined, by expulsion, suspension, fine, censure, or being suspended or barred from being associated with all members, or any other fitting pen- alty, for any violation of its rules; (9) the rules of the association provide a fair and orderly procedure with respect to the dis- ciplining of members and persons associated with members and the denial of membership to any person seeking membership therein or the barring of any person from being associ- ated with a member. In any proceeding to de- termine whether any member or other person shall be disciplined, such rules shall require that specific charges be brought; that such member or person shall be notified of, and be given an opportunity to defend against, such charges; that a record shall be kept; and that the determination shall include— (A) a statement setting forth any act or practice in which such member or other per- son may be found to have engaged, or which such member or other person may be found to have omitted; (B) a statement setting forth the specific rule or rules of the association of which any such act or practice, or omission to act, is deemed to be in violation; (C) a statement whether the acts or prac- tices prohibited by such rule or rules, or the omission of any act required thereby, are deemed to constitute conduct inconsistent with just and equitable principles of trade; and (D) a statement setting forth the penalty imposed; 1 In any proceeding to determine whether a per- son shall be denied membership or whether any person shall be barred from being associ- ated with a member, such rules shall provide that the person shall be notified of, and be given an opportunity to be heard upon, the specific grounds for denial or bar which are under consideration; that a record shall be kept; and that the determination shall set forth the specific grounds upon which the de- nial or bar is based; (10) the rules of the association provide a fair, equitable, and expeditious procedure through arbitration or otherwise for the set- tlement of customers’ claims and grievances against any member or employee thereof: Pro- vided, That (A) the use of such procedure by a customer shall be voluntary, (B) the term ‘‘customer’’ as used in this paragraph shall not include another member of the association, and (C) in the case of a claim arising from a violation in the execution of an order on the floor of a registered entity, such procedure shall provide, to the extent appropriate— (i) for payment of actual damages proxi- mately caused by such violation. If an award of actual damages is made against a floor broker in connection with the execution of a customer order, and the futures commission merchant which selected the floor broker for the execution of the customer order is held to be responsible under section 2(a)(1) of this title for the floor broker’s violation, such fu- tures commission merchant may be required to satisfy such award; and (ii) where the violation is willful and in- tentional, for payment to the customer of punitive or exemplary damages, in addition to losses proximately caused by the viola- tion, in an amount equal to no more than two times the amount of such losses. If puni- tive or exemplary damages are awarded against a floor broker in connection with the execution of a customer order, and the fu- tures commission merchant which selected the floor broker for the execution of such order is held to be responsible under section 2(a)(1) of this title for the floor broker’s vio- lation, such futures commission merchant may be required to satisfy the award of puni- tive or exemplary damages if the floor broker fails to do so, except that such re- quirement shall apply to the futures com- mission merchant only if it willfully and in- tentionally selected the floor broker with the intent to assist or facilitate the floor broker’s violation; and 2 (11) such association provides for meaningful representation on the governing board of such association of a diversity of membership inter- ests and provides that no less than 20 percent of the regular voting members of such board be comprised of qualified nonmembers of or persons who are not regulated by such associa- tion.3 (12)(A) 4 such association provides on all major disciplinary committees for a diversity of membership sufficient to ensure fairness and to prevent special treatment or preference for any person in the conduct of disciplinary proceedings and the assessment of penalties.5 (13) A 6 major disciplinary committee hear- ing a disciplinary matter shall include— (A) qualified persons representing seg- ments of the association membership other than that of the subject of the proceeding; and (B) where appropriate to carry out the pur- poses of this paragraph, qualified persons who are not members of the association. (c) Suspension of registration The Commission may, after notice and oppor- tunity for hearing, suspend the registration of any futures association if it finds that the rules thereof do not conform to the requirements of the Commission, and any such suspension shall remain in effect until the Commission issues an order determining that such rules have been modified to conform with such requirements. Page 139 TITLE 7—AGRICULTURE § 21 (d) Fees and charges In addition to the fees and charges authorized by section 12a(1) of this title, each person reg- istered under this chapter, who is not a member of a futures association registered pursuant to this section, shall pay to the Commission such reasonable fees and charges as may be necessary to defray the costs of additional regulatory du- ties required to be performed by the Commission because such person is not a member of a reg- istered futures association. The Commission shall establish such additional fees and charges by rules and regulations. (e) Registered persons not members of registered associations Any person registered under this chapter, who is not a member of a futures association reg- istered pursuant to this section, in addition to the other requirements and obligations of this chapter and the regulations thereunder shall be subject to such other rules and regulations as the Commission may find necessary to protect the public interest and promote just and equi- table principles of trade. (f) Denial of registration Upon filing of an application for registration pursuant to subsection (a), the Commission may by order grant such registration if the require- ments of this section are satisfied. If, after ap- propriate notice and opportunity for hearing, it appears to the Commission that any require- ment of this section is not satisfied, the Com- mission shall by order deny such registration. (g) Withdrawal from registration; notice of with- drawal A registered futures association may, upon such reasonable notice as the Commission may deem necessary in the public interest, withdraw from registration by filing with the Commission a written notice of withdrawal in such form as the Commission may by rules and regulations prescribe. (h) Commission review of disciplinary actions taken by registered futures associations (1) If any registered futures association takes any final disciplinary action against a member of the association or a person associated with a member, denies admission to any person seeking membership therein, or bars any person from being associated with a member, the association promptly shall give notice thereof to such mem- ber or person and file notice thereof with the Commission. The notice shall be in such form and contain such information as the Commis- sion, by rule or regulation, may prescribe as necessary or appropriate to carry out the pur- poses of this chapter. (2) Any action with respect to which a reg- istered futures association is required by para- graph (1) to file notice shall be subject to review by the Commission on its motion, or on applica- tion by any person aggrieved by the action. Such application shall be filed within 30 days after the date such notice is filed with the Com- mission and received by the aggrieved person, or within such longer period as the Commission may determine. (3)(A) Application to the Commission for re- view, or the institution of review by the Com- mission on its own motion, shall not operate as a stay of such action unless the Commission otherwise orders, summarily or after notice and opportunity for hearing on the question of a stay (which hearing may consist solely of the submission of affidavits or presentation of oral arguments). (B) The Commission shall establish procedures for expedited consideration and determination of the question of a stay. (i) Notice; hearing; findings; cancellation, reduc- tion, or remission of penalties; review by court of appeals (1) In a proceeding to review a final discipli- nary action taken by a registered futures asso- ciation against a member thereof or a person as- sociated with a member, after appropriate no- tice and opportunity for a hearing (which hear- ing may consist solely of consideration of the record before the association and opportunity for the presentation of supporting reasons to af- firm, modify, or set aside the sanction imposed by the association)— (A) if the Commission finds that— (i) the member or person associated with a member has engaged in the acts or practices, or has omitted the acts, that the association has found the member or person to have en- gaged in or omitted; (ii) the acts or practices, or omissions to act, are in violation of the rules of the asso- ciation specified in the determination of the association; and (iii) such rules are, and were applied in a manner, consistent with the purposes of this chapter, the Commission, by order, shall so declare and, as appropriate, affirm the sanction im- posed by the association, modify the sanction in accordance with paragraph (2), or remand the case to the association for further pro- ceedings; or (B) if the Commission does not make any such finding, the Commission, by order, shall set aside the sanction imposed by the associa- tion and, if appropriate, remand the case to the association for further proceedings. (2) If, after a proceeding under paragraph (1), the Commission finds that any penalty imposed on a member or person associated with a mem- ber is excessive or oppressive, having due regard for the public interest, the Commission, by order, shall cancel, reduce, or require the remis- sion of the penalty. (3) In a proceeding to review the denial of membership in a registered futures association or the barring of any person from being associ- ated with a member, after appropriate notice and opportunity for a hearing (which hearing may consist solely of consideration of the record before the association and opportunity for the presentation of supporting reasons to affirm, modify, or set aside the action of the associa- tion)— (A) if the Commission finds that— (i) the specific grounds on which the denial or bar is based exist in fact; (ii) the denial or bar is in accordance with the rules of the association; and Page 140 TITLE 7—AGRICULTURE § 21 (iii) such rules are, and were applied in a manner, consistent with the purposes of this chapter, the Commission, by order, shall so declare and, as appropriate, affirm or modify the ac- tion of the association, or remand the case to the association for further proceedings; or (B) if the Commission does not make any such finding, the Commission, by order, shall set aside the action of the association and re- quire the association to admit the applicant to membership or permit the person to be associ- ated with a member, or, as appropriate, re- mand the case to the association for further proceedings. (4) Any person aggrieved by a final order of the Commission entered under this subsection may file a petition for review with a United States court of appeals in the same manner as provided in section 9 of this title. (j) Changes or additions to association rules Every registered futures association shall file with the Commission in accordance with such rules and regulations as the Commission may prescribe as necessary or appropriate in the pub- lic interest, copies of any changes in or addi- tions to the rules of the association, and such other information and documents as the Com- mission may require to keep current or to sup- plement the registration statement and docu- ments filed pursuant to subsection (a) of this section. A registered futures association shall submit to the Commission any change in or ad- dition to its rules and may make such rules ef- fective ten days after receipt of such submission by the Commission unless, within the ten-day period, the registered futures association re- quests review and approval thereof by the Com- mission or the Commission notifies such reg- istered futures association in writing of its de- termination to review such rules for approval. The Commission shall approve such rules if such rules are determined by the Commission to be consistent with the requirements of this section and not otherwise in violation of this chapter or the regulations issued pursuant to this chapter, and the Commission shall disapprove, after ap- propriate notice and opportunity for hearing, any such rule which the Commission determines at any time to be inconsistent with the require- ments of this section or in violation of this chapter or the regulations issued pursuant to this chapter. If the Commission does not ap- prove or institute disapproval proceedings with respect to any rule within one hundred and eighty days after receipt or within such longer period of time as the registered futures associa- tion may agree to, or if the Commission does not conclude a disapproval proceeding with re- spect to any rule within one year after receipt or within such longer period as the registered futures association may agree to, such rule may be made effective by the registered futures asso- ciation until such time as the Commission dis- approves such rule in accordance with this sub- section. (k) Abrogation of association rules; requests to associations by Commission to alter or sup- plement rules (1) The Commission is authorized by order to abrogate any rule of a registered futures asso- ciation, if after appropriate notice and oppor- tunity for hearing, it appears to the Commission that such abrogation is necessary or appropriate to assure fair dealing by the members of such association, to assure a fair representation of its members in the administration of its affairs or effectuate the purposes of this section. (2) The Commission may in writing request any registered futures association to adopt any specified alteration or supplement to its rules with respect to any of the matters hereinafter enumerated. If such association fails to adopt such alteration or supplement within a reason- able time, the Commission is authorized by order to alter or supplement the rules of such association in the manner theretofore requested, or with such modifications of such alteration or supplement as it deems necessary if, after appro- priate notice and opportunity for hearing, it ap- pears to the Commission that such alteration or supplement is necessary or appropriate in the public interest or to effectuate the purposes of this section, with respect to— (A) the basis for, and procedure in connec- tion with, the denial of membership or the barring from being associated with a member or the disciplining of members or persons asso- ciated with members, or the qualifications re- quired for members or natural persons associ- ated with members or any class thereof; (B) the method for adoption of any change in or addition to the rules of the association; (C) the method of choosing officers and di- rectors. (l) Suspension and revocation of registration; ex- pulsion of members; removal of association officers or directors The Commission is authorized, if such action appears to it to be necessary or appropriate in the public interest or to carry out the purposes of this section— (1) after appropriate notice and opportunity for hearing, by order to suspend for a period not exceeding twelve months or to revoke the registration of a registered futures associa- tion, if the Commission finds that such asso- ciation has violated any provisions of this chapter or any rule or regulation thereunder, or has failed to enforce compliance with its own rules, or has engaged in any other activ- ity tending to defeat the purposes of this chap- ter; (2) after appropriate notice and opportunity for hearing, by order to suspend for a period not exceeding twelve months or to expel from a registered futures association any member thereof, or to suspend for a period not exceed- ing twelve months or to bar any person from being associated with a member thereof, if the Commission finds that such member or per- son— (A) has violated any provision of this chap- ter or any rule or regulation thereunder, or has effected any transaction for any other person who, he had reason to believe, was Page 141 TITLE 7—AGRICULTURE § 21 violating with respect to such transaction any provision of this chapter or any rule or regulation thereunder; or (B) has willfully violated any provision of this chapter, or of any rule, regulation, or order thereunder, or has effected any trans- action for any other person who, he had rea- son to believe, was willfully violating with respect to such transaction any provision of this chapter or rule, regulation, or order; and (3) after appropriate notice and opportunity for hearing, by order to remove from office any officer or director of a registered futures association who, the Commission finds, has willfully failed to enforce the rules of the asso- ciation, or has willfully abused his authority. (m) Rules requiring membership in associations Notwithstanding any other provision of law, the Commission may approve rules of futures as- sociations that, directly or indirectly, require persons eligible for membership in such associa- tions to become members of at least one such association, upon a determination by the Com- mission that such rules are necessary or appro- priate to achieve the purposes and objectives of this chapter. (n) Reports to Congress The Commission shall include in its annual re- ports to Congress information concerning any futures associations registered pursuant to this section and the effectiveness of such associa- tions in regulating the practices of the mem- bers. (o) Delegation to futures associations of registrative functions; discretionary review by Commission; judicial appeal (1) The Commission may require any futures association registered pursuant to this section to perform any portion of the registration func- tions under this chapter with respect to each member of the association other than a reg- istered entity and with respect to each associ- ated person of such member, in accordance with rules, notwithstanding any other provision of law, adopted by such futures association and submitted to the Commission pursuant to sub- section (j), and subject to the provisions of this chapter applicable to registrations granted by the Commission. (2) In performing any Commission registration function authorized by the Commission under section 12a(10) of this title, this section, or any other applicable provisions of this chapter, a fu- tures association may issue orders (A) to refuse to register any person, (B) to register condi- tionally any person, (C) to suspend the registra- tion of any person, (D) to place restrictions on the registration of any person, or (E) to revoke the registration of any person. If such an order is the final decision of the futures association, any person against whom the order has been issued may petition the Commission to review the decision. The Commission may on its own initiative or upon petition decline review or grant review and affirm, set aside, or modify such an order of the futures association; and the findings of the futures association as to the facts, if supported by the weight of the evidence, shall be conclusive. Unless the Commission grants review under this section of an order con- cerning registration issued by a futures associa- tion, the order of the futures association shall be considered to be an order issued by the Com- mission. (3) Nothing in this section shall affect the Commission’s authority to review the granting of a registration application by a registered fu- tures association that is performing any Com- mission registration function authorized by the Commission under section 12a(10) of this title, this section, or any other applicable provision of this chapter. (4) If a person against whom a futures associa- tion has issued a registration order under this subsection petitions the Commission to review that order and the Commission declines to take review, such person may file a petition for re- view with a United States court of appeals, in accordance with section 9 of this title. (p) Establishment of rules for futures associa- tions; approval by Commission Notwithstanding any other provision of this section, each futures association registered under this section on January 11, 1983, shall adopt and submit for Commission approval not later than ninety days after such date, and each futures association that applies for registration after such date shall adopt and include with its application for registration, rules of the associa- tion that require the association to— (1) establish training standards and pro- ficiency testing for persons involved in the so- licitation of transactions subject to the provi- sions of this chapter, supervisors of such per- sons, and all persons for which it has registra- tion responsibilities, and a program to audit and enforce compliance with such standards; (2) establish minimum capital, segregation, and other financial requirements applicable to its members for which such requirements are imposed by the Commission and implement a program to audit and enforce compliance with such requirements, except that such require- ments may not be less stringent than those imposed on such firms by this chapter or by Commission regulation; (3) establish minimum standards governing the sales practices of its members and persons associated therewith for transactions subject to the provisions of this chapter; and (4) establish special supervisory guidelines to protect the public interest relating to the solicitation by telephone of new futures or op- tions accounts and make such guidelines ap- plicable to those members determined to re- quire such guidelines in accordance with standards established by the Commission con- sistent with this chapter. Such guidelines may include a requirement that, with respect to a customer with no previous futures or com- modity options trading experience, the mem- ber may not enter an order for the account of such customer for a period of three days fol- lowing opening of the account and receipt of a signed acknowledgment by the customer of re- ceipt of a risk disclosure statement. Page 142 TITLE 7—AGRICULTURE § 21 7 Two subsecs. (q) have been enacted. (q) 7 Major disciplinary rule violations (1) The Commission shall issue regulations re- quiring each registered futures association to establish and make available to the public a schedule of major violations of any rule within the disciplinary jurisdiction of such registered futures association. (2) The regulations issued by the Commission pursuant to this subsection shall prohibit, for a period of time to be determined by the Commis- sion, any member of a registered futures asso- ciation who is found to have committed any major violation from service on the governing board of any registered futures association or registered entity, or on any disciplinary com- mittee thereof. (q) 7 Program for implementation of rules Each futures association registered under this section shall develop a comprehensive program that fully implements the rules approved by the Commission under this section as soon as prac- ticable but not later than September 30, 1985, in the case of any futures association registered on January 11, 1983, and not later than two and one- half years after the date of registration in the case of any other futures association registered under this section. (r) Rules to avoid duplicative regulation of dual registrants Consistent with this chapter, each futures as- sociation registered under this section shall issue such rules as are necessary to avoid dupli- cative or conflicting rules applicable to any fu- tures commission merchant registered with the Commission pursuant to section 6f(a) of this title (except paragraph (2) thereof), that is also registered with the Securities and Exchange Commission pursuant to section 78o(b) of title 15 (except paragraph (11) thereof), with respect to the application of— (1) rules of such futures association of the type specified in section 6d(e) of this title in- volving security futures products; and (2) similar rules of national securities asso- ciations registered pursuant to section 78o–3(a) of title 15 involving security futures products. (Sept. 21, 1922, ch. 369, § 17, as added Pub. L. 93–463, title III, § 301, Oct. 23, 1974, 88 Stat. 1406; amended Pub. L. 95–405, § 22, Sept. 30, 1978, 92 Stat. 876; Pub. L. 97–444, title II, §§ 217(b), 233, Jan. 11, 1983, 96 Stat. 2307, 2320; Pub. L. 99–641, title I, §§ 107, 108, 110(6), (7), Nov. 10, 1986, 100 Stat. 3558, 3559, 3561; Pub. L. 102–546, title II, §§ 204(a), 206(b), 209(b)(8), 222(c), 228, title IV, § 402(12), Oct. 28, 1992, 106 Stat. 3600, 3602, 3607, 3616, 3619, 3625; Pub. L. 106–554, § 1(a)(5) [title I, § 123(a)(24), title II, § 251(g)], Dec. 21, 2000, 114 Stat. 2763, 2763A–410, 2763A–444; Pub. L. 110–234, title XIII, § 13105(f), May 22, 2008, 122 Stat. 1434; Pub. L. 110–246, § 4(a), title XIII, § 13105(f), June 18, 2008, 122 Stat. 1664, 2196; Pub. L. 111–203, title VII, § 749(g), July 21, 2010, 124 Stat. 1748.) Editorial Notes CODIFICATION Pub. L. 110–234 and Pub. L. 110–246 made identical amendments to this section. The amendments by Pub. L. 110–234 were repealed by section 4(a) of Pub. L. 110–246. AMENDMENTS 2010—Subsec. (r)(1). Pub. L. 111–203 substituted ‘‘sec- tion 6d(e) of this title’’ for ‘‘section 6d(c) of this title’’. 2008—Subsec. (r)(1). Pub. L. 110–246, § 13105(f), sub- stituted ‘‘6d(c)’’ for ‘‘6d(3)’’. 2000—Subsecs. (b)(2), (3), (10), (o)(1), (q)(2). Pub. L. 106–554, § 1(a)(5) [title I, § 123(a)(24)], substituted ‘‘reg- istered entity’’ for ‘‘contract market’’ wherever appear- ing. Subsec. (r). Pub. L. 106–554, § 1(a)(5) [title II, § 251(g)], added subsec. (r). 1992—Subsec. (a)(1), (2). Pub. L. 102–546, § 402(12)(A), realigned margins. Subsec. (b)(3). Pub. L. 102–546, §§ 206(b)(1)(A), (B), 209(b)(8)(A)(i), struck out ‘‘or’’ at end of subpar. (A), in subpar. (B) made technical amendment to reference to sections 9 and 15 of this title to reflect change in ref- erence to corresponding section of original act and struck out ‘‘or’’ at end, and in subpar. (D) substituted a semicolon for period at end. Subsec. (b)(4). Pub. L. 102–546, §§ 206(b)(1)(B), (C), 209(b)(8)(A)(ii), substituted a semicolon for period at end of subpars. (A) to (D), in subpar. (E) substituted ‘‘; and’’ for period at end, and in subpar. (F) made tech- nical amendment to reference to sections 9 and 15 of this title to reflect change in reference to cor- responding section of original act and substituted a semicolon for period at end. Subsec. (b)(5) to (9). Pub. L. 102–546, § 206(b)(1)(B), (C), substituted a semicolon for period at end of pars. (5) to (9) and subpars. (A), (B), and (D) of par. (9) and in par. (9)(C) substituted ‘‘; and’’ for period at end. Subsec. (b)(10). Pub. L. 102–546, §§ 206(b)(1)(C), 222(c), substituted ‘‘(A)’’ for ‘‘(i)’’ and ‘‘voluntary, (B)’’ for ‘‘voluntary and (ii)’’, inserted ‘‘, and’’ and subpar. (C) after ‘‘association’’, and substituted ‘‘; and’’ for period at end. Subsec. (b)(11) to (13). Pub. L. 102–546, § 206(b)(1)(D), added pars. (11) to (13). Subsec. (i)(4). Pub. L. 102–546, § 228, which directed that ‘‘(other than a registered futures association).’’ be struck out, was executed by striking ‘‘(other than a registered futures association)’’ after ‘‘Any person’’ to reflect the probable intent of Congress. Pub. L. 102–546, § 209(b)(8)(B), made technical amend- ment to reference to sections 9 and 15 of this title to re- flect change in reference to corresponding section of original act. Subsec. (l)(2)(B). Pub. L. 102–546, § 402(12)(B), made technical amendment to reference to this chapter ap- pearing after ‘‘violated any provision of’’ to reflect change in reference to corresponding provision of origi- nal act and substituted ‘‘; and’’ for period at end. Subsec. (o)(4). Pub. L. 102–546, § 209(b)(8)(C), made technical amendment to reference to sections 9 and 15 of this title to reflect change in reference to cor- responding section of original act. Subsec. (p)(4). Pub. L. 102–546, § 204(a), added par. (4). Subsec. (q). Pub. L. 102–546, § 206(b)(2), added subsec. (q) relating to major disciplinary rules violations. 1986—Subsec. (b)(2). Pub. L. 99–641, § 110(6), substituted ‘‘within’’ for ‘‘with in’’ before ‘‘the meaning’’. Subsec. (h). Pub. L. 99–641, § 107, amended subsec. (h) generally. Prior to amendment, subsec. (h) read as fol- lows: ‘‘If any registered futures association takes any disciplinary action against any member thereof or any person associated with such a member or denies admis- sion to any person seeking membership therein, or bars any person from being associated with a member, such action shall be subject to review by the Commission, on its own motion, or upon application by any person ag- grieved thereby filed within thirty days after such ac- tion has been taken or within such longer period as the Commission may determine. Application to the Com- mission for review, or the institution of review by the Commission on its own motion, shall operate as a stay of such action until an order is issued upon such review Page 143 TITLE 7—AGRICULTURE § 21 pursuant to subsection (i) of this section unless the Commission otherwise orders, after notice and oppor- tunity for hearing on the question of a stay (which hearing may consist solely of affidavits and oral argu- ments).’’ Subsec. (i). Pub. L. 99–641, § 107, amended subsec. (i) generally. Prior to amendment, subsec. (i) read as fol- lows: ‘‘(1) In a proceeding to review disciplinary action taken by a registered futures association against a member thereof or a person associated with a member, if the Commission, after appropriate notice and oppor- tunity for hearing, upon consideration of the record be- fore the association and such other evidence as it may deem relevant— ‘‘(A) finds that such member or person has engaged in such acts or practices, or has omitted such act, as the association has found him to have engaged in or omitted, and ‘‘(B) determines that such acts or practices, or omission to act, are in violation of such rules of the association as have been designated in the determina- tion of the association, the Commission shall by order dismiss the proceeding, unless it appears to the Commission that such action should be modified in accordance with paragraph (2) of this subsection. The Commission shall likewise determine whether the acts or practices prohibited, or the omission of any act required, by any such rule constitute conduct in- consistent with just and equitable principles of trade, and shall so declare. If it appears to the Commission that the evidence does not warrant the finding re- quired in clause (A), or if the Commission determines that such acts or practices as are found to have been engaged in are not prohibited by the designated rule or rules of the association, or that such act as is found to have been omitted is not required by such designated rule or rules, the Commission shall by order set aside the action of the association. ‘‘(2) If, after appropriate notice and opportunity for hearing, the Commission finds that any penalty im- posed upon a member or person associated with a mem- ber is excessive or oppressive, having due regard to the public interest, the Commission shall by order cancel, reduce, or require the remission of such penalty. ‘‘(3) In any proceeding to review the denial of mem- bership in a registered futures association or the bar- ring of any person from being associated with a mem- ber, if the Commission, after appropriate notice and hearing, and upon consideration of the record before the association and such other evidence as it may deem relevant, determines that the specific grounds on which such denial or bar is based exist in fact and are valid under this section, the Commission shall by order dis- miss the proceeding; otherwise, the Commission shall by order set aside the action of the association and re- quire it to admit the applicant to membership therein, or to permit such person to be associated with a mem- ber.’’ Subsec. (j). Pub. L. 99–641, § 108, struck out sentence which read as follows: ‘‘The Commission shall approve such rules within thirty days of their receipt if Com- mission approval is requested under this subsection or within thirty days after the Commission determines to review for approval any other rules unless the Commis- sion notifies the registered futures association of its in- ability to complete such approval or review within such period of time.’’ Subsec. (k)(1). Pub. L. 99–641, § 110(7), substituted ‘‘section’’ for ‘‘title’’. 1983—Subsec. (b)(4)(E). Pub. L. 97–444, § 233(1), inserted ‘‘, which may require the applicant to be fingerprinted and to submit, or cause to be submitted, such finger- prints to the Attorney General for identification and appropriate processing. Notwithstanding any other pro- vision of law, such an association may receive from the Attorney General all the results of such identification and processing’’ after ‘‘adopt procedures for verification of qualifications of the applicant’’. Subsec. (b)(10). Pub. L. 97–444, § 217(b), required asso- ciation rules to provide for ‘‘expeditious’’ procedure, redesignated cl. (iv) as (ii) and substituted ‘‘ ‘customer’ as used in this paragraph shall not include another member of the association’’ for ‘‘ ‘customer’ as used in this subsection shall not include a futures commission merchant or a floor broker’’, and struck out clauses ‘‘(ii) the procedure shall not be applicable to any claim in excess of $15,000, (iii) the procedure shall not result in any compulsory payment except as agreed upon be- tween the parties,’’. Subsec. (d). Pub. L. 97–444, § 233(2), substituted ‘‘sec- tion 12a(1) of this title’’ for ‘‘section 12a(4) of this title’’. Subsec. (h). Pub. L. 97–444, § 233(3), substituted ‘‘sub- section (i) of this section’’ for ‘‘subsection (k) of this section’’. Subsec. (j). Pub. L. 97–444, § 233(4), substituted ‘‘A reg- istered futures association shall submit to the Commis- sion any change in or addition to its rules and may make such rules effective ten days after receipt of such submission by the Commission unless, within the ten- day period, the registered futures association requests review and approval thereof by the Commission or the Commission notifies such registered futures associa- tion in writing of its determination to review such rules for approval. The Commission shall approve such rules within thirty days of their receipt if Commission approval is requested under this subsection or within thirty days after the Commission determines to review for approval any other rules unless the Commission no- tifies the registered futures association of its inability to complete such approval or review within such period of time. The Commission shall approve such rules if such rules are determined by the Commission to be consistent with the requirements of this section and not otherwise in violation of this chapter or the regula- tions issued pursuant to this chapter, and the Commis- sion shall disapprove, after appropriate notice and op- portunity for hearing, any such rule which the Com- mission determines at any time to be inconsistent with the requirements of this section or in violation of this chapter or the regulations issued pursuant to this chap- ter. If the Commission does not approve or institute disapproval proceedings with respect to any rule within one hundred and eighty days after receipt or within such longer period of time as the registered futures as- sociation may agree to, or if the Commission does not conclude a disapproval proceeding with respect to any rule within one year after receipt or within such longer period as the registered futures association may agree to, such rule may be made effective by the registered futures association until such time as the Commission disapproves such rule in accordance with this sub- section’’ for ‘‘Any change in or addition to the rules of a registered futures association shall be submitted to the Commission for approval and shall take effect upon the thirtieth day after such approval by the Commis- sion, or upon such earlier date as the Commission may determine, unless the Commission shall enter an order disapproving such change or addition; and the Commis- sion shall enter such an order unless such change or ad- dition appears to the Commission to be consistent with the requirements of this section and the provisions of this chapter’’. Subsecs. (o) to (q). Pub. L. 97–444, § 233(5), added sub- secs. (o), (p), and (q). 1978—Subsec. (b)(3)(B). Pub. L. 95–405, § 22(1), struck out ‘‘(7 U.S.C. 9)’’ after ‘‘sections 9 and 15 of this title’’. Subsec. (b)(10). Pub. L. 95–405, § 22(2), substituted ‘‘$15,000’’ for ‘‘$5,000’’. Subsec. (l)(1), (2)(A). Pub. L. 95–405, § 22(3), substituted ‘‘chapter’’ for ‘‘section’’ wherever appearing. Subsecs. (m), (n). Pub. L. 95–405, § 22(4), added subsec. (m) and redesignated former subsec. (m) as (n). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2010 AMENDMENT Amendment by Pub. L. 111–203 effective on the later of 360 days after July 21, 2010, or, to the extent a provi- Page 144 TITLE 7—AGRICULTURE § 22 sion of subtitle A (§§ 711–754) of title VII of Pub. L. 111–203 requires a rulemaking, not less than 60 days after publication of the final rule or regulation imple- menting such provision of subtitle A, see section 754 of Pub. L. 111–203, set out as a note under section 1a of this title. EFFECTIVE DATE OF 2008 AMENDMENT Amendment of this section and repeal of Pub. L. 110–234 by Pub. L. 110–246 effective May 22, 2008, the date of enactment of Pub. L. 110–234, see section 4 of Pub. L. 110–246, set out as an Effective Date note under section 8701 of this title. EFFECTIVE DATE OF 1983 AMENDMENT Amendment by Pub. L. 97–444 effective Jan. 11, 1983, see section 239 of Pub. L. 97–444, set out as a note under section 2 of this title. EFFECTIVE DATE OF 1978 AMENDMENT Amendment by Pub. L. 95–405 effective Oct. 1, 1978, see section 28 of Pub. L. 95–405, set out as a note under section 2 of this title. EFFECTIVE DATE For effective date of section, see section 418 of Pub. L. 93–463, set out as an Effective Date of 1974 Amend- ment note under section 2 of this title. IMPLEMENTATION Pub. L. 102–546, title II, § 204(b), Oct. 28, 1992, 106 Stat. 3600, provided that: ‘‘The guidelines required under sec- tion 17(p)(4) of the Commodity Exchange Act [7 U.S.C. 21(p)(4)] (as added by subsection (a) of this section) shall be submitted by a futures association registered with the Commodity Futures Trading Commission on the date of enactment of this Act [Oct. 28, 1992] to the Commission for the approval of the Commission not later than one hundred and eighty days after the date of enactment of this Act.’’ STUDY ON COMPUTERIZED FUTURES TRADING Pub. L. 102–546, title II, § 220(b), (c), Oct. 28, 1992, 106 Stat. 3614, required the Commodity Futures Trading Commission to conduct a study related to trading in fu- tures and options subject to the jurisdiction of the Commission under the Commodity Exchange Act through computers or by other electronic means, and also required the Commission, not later than two years after Oct. 28, 1992, to submit to Congress a report con- taining the results of the study and any appropriate recommendations. § 22. Research and information programs; reports to Congress (a) The Commission shall establish and main- tain, as part of its ongoing operations, research and information programs to (1) determine the feasibility of trading by computer, and the ex- panded use of modern information system tech- nology, electronic data processing, and modern communication systems by commodity ex- changes, boards of trade, and by the Commission itself for purposes of improving, strengthening, facilitating, or regulating futures trading oper- ations; (2) assist in the development of edu- cational and other informational materials re- garding futures trading for dissemination and use among producers, market users, and the gen- eral public; and (3) carry out the general pur- poses of this chapter. (b) The Commission shall include in its annual reports to Congress plans and findings with re- spect to implementing this section. (Sept. 21, 1922, ch. 369, § 18, as added Pub. L. 93–463, title IV, § 416, Oct. 23, 1974, 88 Stat. 1415.) Statutory Notes and Related Subsidiaries EFFECTIVE DATE For effective date of section, see section 418 of Pub. L. 93–463, set out as an Effective Date of 1974 Amend- ment note under section 2 of this title. § 23. Standardized contracts for certain commod- ities (a) Margin accounts or contracts and leverage accounts or contracts prohibited except as authorized Except as authorized under subsection (b), no person shall offer to enter into, enter into, or confirm the execution of, any transaction for the delivery of any commodity under a stand- ardized contract commonly known to the trade as a margin account, margin contract, leverage account, or leverage contract, or under any con- tract, account, arrangement, scheme, or device that the Commission determines serves the same function or functions as such a standard- ized contract, or is marketed or managed in sub- stantially the same manner as such a standard- ized contract. (b) Permission to enter into contracts for deliv- ery of silver or gold bullion, bulk silver or gold coins, or platinum; rules and regula- tions (1) Subject to paragraph (2), no person shall offer to enter into, enter into, or confirm the execution of, any transaction for the delivery of silver bullion, gold bullion, bulk silver coins, bulk gold coins, or platinum under a standard- ized contract described in subsection (a), con- trary to the terms of any rule, regulation, or order that the Commission shall prescribe, which may include terms designed to ensure the financial solvency of the transaction or prevent manipulation or fraud. Such rule, regulation, or order may be made only after notice and oppor- tunity for hearing. The Commission may set dif- ferent terms and conditions for transactions in- volving different commodities. (2) No person may engage in any activity de- scribed in paragraph (1) who is not permitted to engage in such activity, by the rules, regula- tions, and orders of the Commission in effect on November 10, 1986, until the Commission permits such person to engage in such activity in ac- cordance with regulations issued in accordance with subsection (c)(2). (c) Survey of persons interested in engaging in transactions of silver and gold, etc.; assist- ance of futures association; regulations (1)(A) Not later than 2 years after November 10, 1986, the Commission shall— (i) with the assistance of a futures associa- tion registered under this chapter, conduct a survey concerning the persons interested in engaging in the business of offering to enter into, entering into, or confirming the execu- tion of, the transactions described in sub- section (b)(1); and (ii) transmit a report of the results of the survey to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate.