CFTC Issues Final Rule Providing Foreign Natural Persons with Alternative to Fingerprinting | Practical Law

CFTC Issues Final Rule Providing Foreign Natural Persons with Alternative to Fingerprinting | Practical Law

The CFTC approved a final rule which provides an alternative to the requirement that foreign natural persons must provide fingerprints when applying for CFTC registration under CFTC Regulation 3.21.

CFTC Issues Final Rule Providing Foreign Natural Persons with Alternative to Fingerprinting

by Practical Law Finance
Published on 08 Apr 2016 • USA (National/Federal)
The CFTC approved a final rule which provides an alternative to the requirement that foreign natural persons must provide fingerprints when applying for CFTC registration under CFTC Regulation 3.21.
On March 28, 2016, the CFTC approved a final rule which provides an alternative to the requirement that foreign natural persons must provide fingerprints when applying for CFTC registration under CFTC Regulation 3.21.
The final rule adds a section to Regulation 3.21 which will enable the registered firm of the foreign natural person to complete a criminal history background check in lieu of submitting fingerprints. A foreign natural person is defined as any natural person who has not resided in the US since reaching the age of 18 years.
Prior to this rule, foreign natural persons must submit fingerprints if they:
  • Wish to be principals or associated persons (APs) of CFTC registrants. CFTC registrants include futures commission merchants (FCMs), retail foreign exchange dealers, introducing brokers, commodity pool operators (CPOs), commodity trading advisors (CTAs), swap dealers (SDs), major swap participants (MSPs), leverage transaction merchants, floor brokers and floor traders.
  • Are responsible for entry of orders from a floor broker or floor trader's own account.
The CFTC adopted the final rule without any modifications from its original proposal. Under CFTC Regulation 3.21(e)(2), certain "certifying firms" may be able to fulfil their obligation to provide a fingerprint card for a foreign natural person if:
  • The firm causes a criminal history background check of the foreign natural person to be performed. The criminal history background check must be completed not more than one calendar year prior to the date that the certifying firm submits the certification to the National Futures Association (NFA).
  • The criminal history background check did not reveal any matters that constitute a disqualification under Sections 8a(2) or 8a(3) of the Commodity Exchange Act (CEA), other than those disclosed to NFA.
  • A person authorized by a certifying firm submits a certification to the NFA, which:
    • states that the conditions described above have been satisfied; and
    • is signed by a person authorized by the certifying firm.
  • The certifying firm must maintain records documenting each criminal history background check as well as the results.
Certifying firms are defined as natural persons acting in certain specified capacities in relation to the firm.
This final rule extends and supersedes previous CFTC no-action letters on the matter (CFTC Staff Letters 12-49 and 13-29), which were granted in response to concerns raised by industry participants over the undue burdens involved in fingerprinting.
The CFTC believes that the final rule will:
  • Provide certainty to market participants.
  • Create more liquidity in the commodity interest markets.
  • Increase competition and accessibility in the commodity interest markets.
  • Remove an impediment to participation in US markets by foreign natural persons.
  • Ensure the continued protection of market participants and the public.
  • Maintain consistency with the principles of international comity.
The final rule will become effective on May 2, 2016.