7 U.S.C. § 6d — Dealing by unregistered futures commission

Page 59 TITLE 7—AGRICULTURE § 6d 1 So in original. Probably means subsection (a)(2) of this sec- tion. 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- 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 1992 AMENDMENT Pub. L. 102–546, title II, § 203(b), Oct. 28, 1992, 106 Stat. 3600, provided that: ‘‘The Commission shall adopt the rules required by the amendment made under sub- section (a) [amending this section] within two hundred and seventy days after the date of enactment of this Act [Oct. 28, 1992].’’ 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 OF 1974 AMENDMENT For effective date of amendment by Pub. L. 93–463, see section 418 of Pub. L. 93–463, set out as a note under section 2 of this title. EFFECTIVE DATE For effective date of section, see section 13 of act June 15, 1936, set out as an Effective Date of 1936 Amendment note under section 1 of this title. § 6d. Dealing by unregistered futures commission merchants or introducing brokers prohib- ited; duties in handling customer receipts; conflict-of-interest systems and procedures; Chief Compliance Officer; rules to avoid du- plicative regulations; swap requirements; portfolio margining accounts (a) Futures commission merchant registration requirements; duties of merchants in han- dling customer receipts It shall be unlawful for any person to be a fu- tures commission merchant unless— (1) such person shall have registered, under this chapter, with the Commission as such fu- tures commission merchant and such registra- tion shall not have expired nor been suspended nor revoked; and (2) such person shall, whether a member or nonmember of a contract market or deriva- tives transaction execution facility, treat and deal with all money, securities, and property received by such person to margin, guarantee, or secure the trades or contracts of any cus- tomer of such person, or accruing to such cus- tomer as the result of such trades or con- tracts, as belonging to such customer. Such money, securities, and property shall be sepa- rately accounted for and shall not be commin- gled with the funds of such commission mer- chant or be used to margin or guarantee the trades or contracts, or to secure or extend the credit, of any customer or person other than the one for whom the same are held: Provided, however, That such money, securities, and property of the customers of such futures com- mission merchant may, for convenience, be commingled and deposited in the same ac- count or accounts with any bank or trust com- pany or with the clearing house organization of such contract market or derivatives trans- action execution facility, and that such share thereof as in the normal course of business shall be necessary to margin, guarantee, se- cure, transfer, adjust, or settle the contracts or trades of such customers, or resulting mar- ket positions, with the clearinghouse organi- zation of such contract market or derivatives transaction execution facility or with any member of such contract market or deriva- tives transaction execution facility, may be withdrawn and applied to such purposes, in- cluding the payment of commissions, broker- age, interest, taxes, storage, and other charges, lawfully accruing in connection with such contracts and trades: Provided further, That in accordance with such terms and condi- tions as the Commission may prescribe by rule, regulation, or order, such money, securi- ties, and property of the customers of such fu- tures commission merchant may be commin- gled and deposited as provided in this section with any other money, securities, and prop- erty received by such futures commission mer- chant and required by the Commission to be separately accounted for and treated and dealt with as belonging to the customers of such fu- tures commission merchant: Provided further, That such money may be invested in obliga- tions of the United States, in general obliga- tions of any State or of any political subdivi- sion thereof, and in obligations fully guaran- teed as to principal and interest by the United States, such investments to be made in ac- cordance with such rules and regulations and subject to such conditions as the Commission may prescribe. (b) Duties of clearing agencies, depositories, and others in handling customer receipts It shall be unlawful for any person, including but not limited to any clearing agency of a con- tract market or derivatives transaction execu- tion facility and any depository, that has re- ceived any money, securities, or property for de- posit in a separate account as provided in para- graph (2) of this section,1 to hold, dispose of, or use any such money, securities, or property as belonging to the depositing futures commission merchant or any person other than the cus- tomers of such futures commission merchant. (c) Conflicts of interest The Commission shall require that futures commission merchants and introducing brokers implement conflict-of-interest systems and pro- cedures that— (1) establish structural and institutional safeguards to ensure that the activities of any person within the firm relating to research or analysis of the price or market for any com- modity are separated by appropriate informa- tional partitions within the firm from the re- Page 60 TITLE 7—AGRICULTURE § 6d view, pressure, or oversight of persons whose involvement in trading or clearing activities might potentially bias the judgment or super- vision of the persons; and (2) address such other issues as the Commis- sion determines to be appropriate. (d) Designation of Chief Compliance Officer Each futures commission merchant shall des- ignate an individual to serve as its Chief Com- pliance Officer and perform such duties and re- sponsibilities as shall be set forth in regulations to be adopted by the Commission or rules to be adopted by a futures association registered under section 21 of this title. (e) Rules to avoid duplicative regulation of dual registrants Consistent with this chapter, the Commission, in consultation with the Securities and Ex- change Commission, shall issue such rules, regu- lations, or orders as are necessary to avoid du- plicative or conflicting regulations applicable to any futures commission merchant registered with the Commission pursuant to section 6f(a) of this title (except paragraph (2) thereof), that is also registered with the Securities and Ex- change Commission pursuant to section 78o(b) of title 15 (except paragraph (11) thereof), involving the application of— (1) section 78h, section 78o(c)(3), and section 78q of title 15 and the rules and regulations thereunder related to the treatment of cus- tomer funds, securities, or property, mainte- nance of books and records, financial report- ing or other financial responsibility rules (as defined in section 78c(a)(40) of title 15), involv- ing security futures products; and (2) similar provisions of this chapter and the rules and regulations thereunder involving se- curity futures products. (f) Swaps (1) Registration requirement It shall be unlawful for any person to accept any money, securities, or property (or to ex- tend any credit in lieu of money, securities, or property) from, for, or on behalf of a swaps customer to margin, guarantee, or secure a swap cleared by or through a derivatives clear- ing organization (including money, securities, or property accruing to the customer as the result of such a swap), unless the person shall have registered under this chapter with the Commission as a futures commission mer- chant, and the registration shall not have ex- pired nor been suspended nor revoked. (2) Cleared swaps (A) Segregation required A futures commission merchant shall treat and deal with all money, securities, and property of any swaps customer received to margin, guarantee, or secure a swap cleared by or though a derivatives clearing organization (including money, securities, or property accruing to the swaps customer as the result of such a swap) as belonging to the swaps customer. (B) Commingling prohibited Money, securities, and property of a swaps customer described in subparagraph (A) shall be separately accounted for and shall not be commingled with the funds of the fu- tures commission merchant or be used to margin, secure, or guarantee any trades or contracts of any swaps customer or person other than the person for whom the same are held. (3) Exceptions (A) Use of funds (i) In general Notwithstanding paragraph (2), money, securities, and property of swap customers of a futures commission merchant de- scribed in paragraph (2) may, for conven- ience, be commingled and deposited in the same account or accounts with any bank or trust company or with a derivatives clearing organization. (ii) Withdrawal Notwithstanding paragraph (2), such share of the money, securities, and prop- erty described in clause (i) as in the nor- mal course of business shall be necessary to margin, guarantee, secure, transfer, ad- just, or settle a cleared swap with a deriva- tives clearing organization, or with any member of the derivatives clearing organi- zation, may be withdrawn and applied to such purposes, including the payment of commissions, brokerage, interest, taxes, storage, and other charges, lawfully accru- ing in connection with the cleared swap. (B) Commission action Notwithstanding paragraph (2), in accord- ance with such terms and conditions as the Commission may prescribe by rule, regula- tion, or order, any money, securities, or property of the swaps customers of a futures commission merchant described in para- graph (2) may be commingled and deposited in customer accounts with any other money, securities, or property received by the fu- tures commission merchant and required by the Commission to be separately accounted for and treated and dealt with as belonging to the swaps customer of the futures com- mission merchant. (4) Permitted investments Money described in paragraph (2) may be in- vested in obligations of the United States, in general obligations of any State or of any po- litical subdivision of a State, and in obliga- tions fully guaranteed as to principal and in- terest by the United States, or in any other in- vestment that the Commission may by rule or regulation prescribe, and such investments shall be made in accordance with such rules and regulations and subject to such conditions as the Commission may prescribe. (5) Commodity contract A swap cleared by or through a derivatives clearing organization shall be considered to be a commodity contract as such term is defined in section 761 of title 11, with regard to all money, securities, and property of any swaps customer received by a futures commission merchant or a derivatives clearing organiza- Page 61 TITLE 7—AGRICULTURE § 6d tion to margin, guarantee, or secure the swap (including money, securities, or property ac- cruing to the customer as the result of the swap). (6) Prohibition It shall be unlawful for any person, including any derivatives clearing organization and any depository institution, that has received any money, securities, or property for deposit in a separate account or accounts as provided in paragraph (2) to hold, dispose of, or use any such money, securities, or property as belong- ing to the depositing futures commission mer- chant or any person other than the swaps cus- tomer of the futures commission merchant. (g) Introducing broker registration requirements It shall be unlawful for any person to be an in- troducing broker unless such person shall have registered under this chapter with the Commis- sion as an introducing broker and such registra- tion shall not have expired nor been suspended nor revoked. (h) Contracts held in portfolio margining ac- counts Notwithstanding subsection (a)(2) or the rules and regulations thereunder, and pursuant to an exemption granted by the Commission under section 6(c) of this title or pursuant to a rule or regulation, a futures commission merchant that is registered pursuant to section 6f(a)(1) of this title and also registered as a broker or dealer pursuant to section 78(o)(b)(1) of title 15 may, pursuant to a portfolio margining program ap- proved by the Securities and Exchange Commis- sion pursuant to section 78s(b) of title 15, hold in a portfolio margining account carried as a secu- rities account subject to section 78(o)(c)(3) of title 15 and the rules and regulations there- under, a contract for the purchase or sale of a commodity for future delivery or an option on such a contract, and any money, securities or other property received from a customer to mar- gin, guarantee or secure such a contract, or ac- cruing to a customer as the result of such a con- tract. The Commission shall consult with the Securities and Exchange Commission to adopt rules to ensure that such transactions and ac- counts are subject to comparable requirements to the extent practical for similar products. (Sept. 21, 1922, ch. 369, § 4d, as added June 15, 1936, ch. 545, § 5, 49 Stat. 1494; amended Pub. L. 90–258, § 6, Feb. 19, 1968, 82 Stat. 27; Pub. L. 93–463, title I, § 103(a), Oct. 23, 1974, 88 Stat. 1392; Pub. L. 95–405, § 4, Sept. 30, 1978, 92 Stat. 869; Pub. L. 97–444, title II, § 207, Jan. 11, 1983, 96 Stat. 2302; Pub. L. 106–554, § 1(a)(5) [title I, § 123(a)(6), title II, § 251(f)], Dec. 21, 2000, 114 Stat. 2763, 2763A–407, 2763A–443; Pub. L. 111–203, title VII, §§ 713(b), 724(a), 732, 749(a), July 21, 2010, 124 Stat. 1646, 1682, 1712, 1746.) Editorial Notes AMENDMENTS 2010—Subsec. (a). Pub. L. 111–203, § 749(a)(1)(A), in in- troductory provisions, substituted ‘‘be a’’ for ‘‘engage as’’ and struck out ‘‘or introducing broker in soliciting orders or accepting orders for the purchase or sale of any commodity for future delivery, or involving any contracts of sale of any commodity for future delivery, on or subject to the rules of any contract market or de- rivatives transaction execution facility’’ after ‘‘mer- chant’’. Subsec. (a)(1). Pub. L. 111–203, § 749(a)(1)(B), struck out ‘‘or introducing broker’’ after ‘‘merchant’’. Subsec. (a)(2). Pub. L. 111–203, § 749(a)(1)(C), struck out ‘‘if a futures commission merchant,’’ after ‘‘such per- son shall,’’. Subsecs. (c) to (e). Pub. L. 111–203, § 732, added sub- secs. (c) and (d) and redesignated former subsec. (c) as (e). Subsec. (f). Pub. L. 111–203, § 724(a), which directed amendment of section by adding subsec. (f) at end, was executed by making the addition after subsec. (e) to re- flect the probable intent of Congress and the addition of subsec. (h) by section 713(b) of Pub. L. 111–203. Subsec. (g). Pub. L. 111–203, § 749(a)(2), which directed amendment of section by adding subsec. (g) at end, was executed by making the addition after subsec. (f) to re- flect the probable intent of Congress and the addition of subsec. (h) by section 713(b) of Pub. L. 111–203. Subsec. (h). Pub. L. 111–203, § 713(b), added subsec. (h). 2000—Pub. L. 106–554, § 1(a)(5) [title II, § 251(f)], des- ignated first undesignated par. as subsec. (a), des- ignated second undesignated par. as subsec. (b), and added subsec. (c). Pub. L. 106–554, § 1(a)(5) [title I, § 123(a)(6)], inserted ‘‘or derivatives transaction execution facility’’ after ‘‘contract market’’ wherever appearing. 1983—Pub. L. 97–444, § 207(1), inserted reference to in- troducing brokers in provisions preceding par. (1). Par. (1). Pub. L. 97–444, § 207(2), inserted ‘‘or intro- ducing broker’’ after ‘‘futures commission merchant’’. Par. (2). Pub. L. 97–444, § 207(3), inserted ‘‘if a futures commission merchant,’’ after ‘‘such person shall,’’. 1978—Pub. L. 95–405 in par. (2) inserted provisions au- thorizing Commission to prescribe terms and condi- tions under which funds and property commingled and deposited as permitted by par. (2) may be commingled and deposited with other funds and property received by a futures commission merchant and required by Commission to be separately accounted for and treated as belonging to its customers. 1974—Pub. L. 93–463 substituted ‘‘Commission’’ for ‘‘Secretary of Agriculture’’ in pars. (1) and (2). 1968—Pub. L. 90–258 struck out from second proviso of first par. authorization for investment of customer funds in investment securities of the kind national banking associations may buy or in loans secured by negotiable warehouse receipts conveying or securing title to readily marketable commodities to the extent of the current loan value of such receipts and added second par., making it unlawful for any person, includ- ing a clearing agency of a contract market or any de- pository, to treat customer funds as belonging to any person other than the customer, respectively. 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- 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 1983 AMENDMENT Amendment by Pub. L. 97–444 effective 120 days after Jan. 11, 1983, or such earlier date as the Commission shall prescribe by regulation, 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. Page 62 TITLE 7—AGRICULTURE § 6e EFFECTIVE DATE OF 1974 AMENDMENT For effective date of amendment by Pub. L. 93–463, see section 418 of Pub. L. 93–463, set out as a note under section 2 of this title. EFFECTIVE DATE OF 1968 AMENDMENT Amendment by Pub. L. 90–258 effective 120 days after Feb. 19, 1968, see section 28 of Pub. L. 90–258, set out as a note under section 2 of this title. EFFECTIVE DATE For effective date of section, see section 13 of act June 15, 1936, set out as an Effective Date of 1936 Amendment note under section 1 of this title. § 6e. Dealings by unregistered floor trader or broker prohibited It shall be unlawful for any person to act as floor trader in executing purchases and sales, or as floor broker in executing any orders for the purchase or sale, of any commodity for future delivery, or involving any contracts of sale of any commodity for future delivery, on or sub- ject to the rules of any contract market or de- rivatives transaction execution facility unless such person shall have registered, under this chapter, with the Commission as such floor trader or floor broker and such registration shall not have expired nor been suspended nor revoked. (Sept. 21, 1922, ch. 369, § 4e, as added June 15, 1936, ch. 545, § 5, 49 Stat. 1495; amended Pub. L. 93–463, title I, § 103(a), Oct. 23, 1974, 88 Stat. 1392; Pub. L. 102–546, title II, § 207(a), Oct. 28, 1992, 106 Stat. 3604; Pub. L. 106–554, § 1(a)(5) [title I, § 123(a)(6)], Dec. 21, 2000, 114 Stat. 2763, 2763A–407.) Editorial Notes AMENDMENTS 2000—Pub. L. 106–554 inserted ‘‘or derivatives trans- action execution facility’’ after ‘‘contract market’’. 1992—Pub. L. 102–546 amended section generally. Prior to amendment, section read as follows: ‘‘It shall be un- lawful for any person to act as floor broker in exe- cuting any orders for the purchase or sale of any com- modity for future delivery, or involving any contracts of sale of any commodity for future delivery, on or sub- ject to the rules of any contract market unless such person shall have registered, under this chapter, with the Commission as such floor broker and such registra- tion shall not have expired nor been suspended nor re- voked.’’ 1974—Pub. L. 93–463 substituted ‘‘Commission’’ for ‘‘Secretary of Agriculture’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1992 AMENDMENT Pub. L. 102–546, title II, § 207(c), Oct. 28, 1992, 106 Stat. 3604, provided that: ‘‘The amendments made by this section [amending this section and sections 6f, 6g, 12a, and 13a–2 of this title] shall become effective one hun- dred and eighty days after the date of enactment of this Act [Oct. 28, 1992], and the Commodity Futures Trading Commission shall issue any regulations nec- essary to implement the amendments made by this sec- tion no later than one hundred and eighty days after the date of enactment of this Act.’’ EFFECTIVE DATE OF 1974 AMENDMENT For effective date of amendment by Pub. L. 93–463, see section 418 of Pub. L. 93–463, set out as a note under section 2 of this title. EFFECTIVE DATE For effective date of section, see section 13 of act June 15, 1936, set out as an Effective Date of 1936 Amendment note under section 1 of this title. § 6f. Registration and financial requirements; risk assessment (a) Registration of futures commission mer- chants, introducing brokers, and floor bro- kers and traders (1) Any person desiring to register as a futures commission merchant, introducing broker, floor broker, or floor trader hereunder shall be reg- istered upon application to the Commission. The application shall be made in such form and man- ner as prescribed by the Commission, giving such information and facts as the Commission may deem necessary concerning the business in which the applicant is or will be engaged, in- cluding in the case of an application of a futures commission merchant or an introducing broker, the names and addresses of the managers of all branch offices, and the names of such officers and partners, if a partnership, and of such offi- cers, directors, and stockholders, if a corpora- tion, as the Commission may direct. Such per- son, when registered hereunder, shall likewise continue to report and furnish to the Commis- sion the above-mentioned information and such other information pertaining to such person’s business as the Commission may require. Each registration shall expire on December 31 of the year for which issued or at such other time, not less than one year from the date of issuance, as the Commission may by rule, regulation, or order prescribe, and shall be renewed upon appli- cation therefor unless the registration has been suspended (and the period of such suspension has not expired) or revoked pursuant to the provi- sions of this chapter. (2) Notwithstanding paragraph (1), and except as provided in paragraph (3), any broker or deal- er that is registered with the Securities and Ex- change Commission shall be registered as a fu- tures commission merchant or introducing broker, as applicable, if— (A) the broker or dealer limits its solicita- tion of orders, acceptance of orders, or execu- tion of orders, or placing of orders on behalf of others involving any contracts of sale of any commodity for future delivery, on or subject to the rules of any contract market or reg- istered derivatives transaction execution fa- cility to security futures products; (B) the broker or dealer files written notice with the Commission in such form as the Com- mission, by rule, may prescribe containing such information as the Commission, by rule, may prescribe as necessary or appropriate in the public interest or for the protection of in- vestors; (C) the registration of the broker or dealer is not suspended pursuant to an order of the Se- curities and Exchange Commission; and (D) the broker or dealer is a member of a na- tional securities association registered pursu- ant to section 78o–3(a) of title 15. The registration shall be effective contempora- neously with the submission of notice, in writ- ten or electronic form, to the Commission.