Full text of Commodity Futures Trading Commission Act of 1974
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88
STAT.]
PUBLIC LAW 93-463-OCT. 23, 1974
1389
Public Law 93-463
AN ACT
To amend the Commodity Exchange Act to strengthen the regulation of futures
trading, to bring all agricultural and other commodities traded on exchanges
under regulation, and for other purposes.
October 23, 1974
[H. R. 13113]
Be it eihacted hy the Senate and House of Representatives of the
United States of ATnerica in Congress assemhled^ That this Act may p^j°|^'^°xra^dij,
be cited as the "Commodity Futures Trading Commission Act of commission A"^
1974'-.
of 1974.
7 u s e 4a note.
T I T L E r—COMMODITY F U T U R E S T R A D I N G
COMMISSION
SEC. 101. (a) Section 2(a) of the Commodity Exchange Act, as
amended (7 U.S.C. 2,4), is amended—
(1) By inserting " ( 1 ) " after the subsection designation.
(2) By striking the last sentence of section 2(a) and inserting in
lieu thereof the following new sentence: "The words 'the Commission'
shall mean the Commodity Futures Trading Commission established
under paragraph (2) of this subsection."
(3) By adding at the end thereof the following new paragraphs:
"(2) There is hereby established, as an independent agency of the
United States Government, a Commodity Futures Trading Commission. The Commission shall be composed of a Chairman and four other
Commissioners, who shall be appointed by the President, by and with
the advice and consent of the Senate. In nominating persons for
appointment, the President shall seek to establish and maintain a balanced Commission, including, but not limited to, persons of demonstrated knowledge in futures trading or its regulation and persons of
demonstrated knowledge in the production, merchandising, processing
or distribution of one or more of the commodities or other goods and
articles, services, rights and interests covered by this Act. Not more
than three of the members of the Commission shall be members of the
same political party. Each Commissioner shall hold office for a term of
five years and until his successor is appointed and has qualified,
except that he shall not so continue to serve beyond the expiration of
the next session of Congress subsequent to the expiration of said
fixed term of office, and except (A) any Commissioner appointed to
fill a vacancy occurring prior to the expiration of the term for which
his predecessor was appointed shall be appointed for the remainder
of such term, and (B) the terms of office of the Commissioners first
taking office after the enactment of this paragraph shall expire as
designated by the President at the time of nomination, one at the
end of one year, one at the end of two years, one at the end of three
years, one at the end of four years, and one at the end of five years.
"(3) A vacancy in the Commission shall not impair the right of the
remaining Commissioners to exercise all the powers of the Commission.
"(4) The Commission shall have a General Counsel, who shall be
appointed by the Commission and serve at the pleasure of the Commission. The General Counsel shall report directly to the Commission and serve as its legal advisor. The Commission shall appoint
such other attorneys as may be necessary, in the opinion of the Commission, to assist the General Counsel, represent the Commission in
all disciplinary proceedings pending before it, represent the Commission in courts of law whenever appropriate, assist the Department of Justice in handling litigation concerning the Commission in
Commodity
F u t u r e s Trading
Commission.
Establishment.
Chairman and
Commissioners.
7 u s e 4a.
General C o u n s e l .
1390
Executive Director.
E x e r c i s e of
functions.
Conflict of interests.
L i a i s o n with
Agriculture Department.
T r a n s m i t t a l of
budget r e q u e s t s
and l e g i s l a t i v e
recommendations
to c o n g r e s s i o n a l
committees.
PUBLIC LAW 93-463-OCT. 23, 1974
[88 STAT.
courts of law, and perform such other legal duties and functions as
the Commission may direct,
"(5) The Commission shall have an Executive Director, who shall
be appointed by the Commission, by and with the advice and consent
of the Senate, and serve at the pleasure of the Commission. The Executive Director shall report directly to the Commission and perform
such functions and duties as the Commission may prescribe.
"(6) (A) Except as otherwise provided in this paragraph and in
paragraphs (4) and (5) of this subsection, the executive and administrative functions of the Commission, including functions of the Commission with respect to the appointment and supervision of personnel
employed under the Commission, the distribution of business among
such personnel and among administrative units of the Commission,
and the use and expenditure of funds, shall be exercised solely by the
Chairman.
" ( B ) In carrying out any of his functions under the provisions of
this paragraph, the Chairman shall be governed by general policies
of the Commission and by such regulatory decisions, findings, and
determinations as the Commission may by law be authorized to make.
" ( C ) The appointment by the Chairman of the heads of major
administrative units under the Commission shall be subject to the
approval of the Commission.
" ( D ) Personnel employed regularly and full time in the immediate offices of Commissioners other than the Chairman shall not be
affected by the provisions of this paragraph.
" ( E ) There are hereby reserved to the Commission its functions
with respect to revising budget estimates and with respect to determining the distribution of appropriated funds according to major
programs and purposes.
" ( F ) The Chairman may from time to time make such provisions
as he shall deem appropriate authorizing the performance by any
officer, employee, or administrative unit under his jurisdiction of any
functions of the Chairman under this paragraph.
"(7) No Commissioner or employee of the Commission shall accept
employment or compensation from any person, exchange, or clearinghouse subject to regulation by the Commission under this Act during
his term of office, nor shall he participate, directly or indirectly, in
any contract market operations or transactions of a character subject
to regulation by the Commission.
"(8) The Commission shall, in cooperation with the Secretary of
Agriculture, establish a separate office within the Department of Agriculture to be staffed with employees of the Commission for the purpose
of maintaining a liaison between the Commission and the Department
of Agriculture. The Secretary shall take such steps as may be necessary
to enable the Commission to obtain information and utilize such services and facilities of the Department of Agriculture as may be necessary in order to maintain effectively such liaison. I n addition, the
Secretary shall appoint a liaison officer, who shall be an employee of the
Office of the Secretary, for the purpose of maintaining a liaison
between the Department of Agriculture and the Commission. The
Commission shall furnish such liaison officer appropriate office space
within the offices of the Commission and shall allow such liaison
officer to attend and observe all deliberations and proceedings of the
Commission.
"(9) (A) Whenever the Commission submits any budget estimate or
request to the President or the Office of Management and Budget, it
shall concurrently transmit copies of that estimate or request to the
House and Senate Appropriations Committees and the House Com-
88 STAT. ]
PUBLIC LAW 93-463-OCT. 23, 1974
mittee on Agriculture and the Senate Committee on Agriculture and
Forestry.
" ( B ) Whenever the Commission transmits any legislative recommendations, or testimony, or comments on legislation to the President
or the Office of Management and Budget, it shall concurrently transmit copies thereof to the House Committee on Agriculture and the
Senate Committee on Agriculture and Forestry. No officer or agency of
the United States shall have any authority to require the Commission
to submit its legislative recommendations, or testimony, or comments
on legislation to any officer or agency of the United States for
approval, comments, or review, prior to the submission of such recommendations, testimony, or comments to the Congress. In instances in
which the Commission voluntarily seeks to obtain the comments or
review of any officer or agency of the United States, the Commission
shall include a description of such actions in its legislative recommendations, testimony, or comments on legislation which it transmits
to the Congress.
"(10) The Commission shall have an official seal, which shall be
judicially noticed.
"(11) The Commission is authorized to pronmlgate such rules and
regulations as it deems necessary to govern the operating procedures
and conduct of the business of the Commission."
(b) Section 12 of the Commodity Exchange Act, as amended (7
U.S.C. 16), is amended by striking such section and inserting in lieu
thereof the following:
"SEC. 12. (a) The Commission may cooperate with Ruy Department
or agency of the Government, any State, territory, district, or possession, or department, agency, or political subdivision thereof, or any
person.
"(b) The Commission shall have the authority to employ such
investigators, special experts. Administrative Law Judges, clerks, and
other employees as it may from time to time find necessary for the
proper performance of its duties and as ma^ be from time to time
appropriated for by Congress. The Commission may employ experts
and consultants in accordance with section 3109 of title 5 of the
United States Code, and compensate such persons at rates not in excess
of the maximum daily rate prescribed for GS-18 under section 5332 of
title 5 of the United States Code. The Commission shall also have
authority to make and enter into contracts with respect to all matters
which in the judgment of the Commission are necessary and appropriate to effectuate the purposes and provisions of this Act, including,
but not limited to, the rental of necessary space at the seat of Government and elsewhere.
"(c) All of the expenses of the Commissioners, including all necessary expenses for transportation incurred by them while on official
business of the Commission, shall be allowed and paid on the presentation of itemized vouchers therefor approved by the Commission.
" ( d ) There are hereby authorized to be appropriated to carry out
the provisions of this Act such sums as may be required for the fiscal
year ending June 30, 1975, for the fiscal year ending June 30, 1976,
for the fiscal year ending June 30, 1977, and for the fiscal year ending
June 30, 1978."
SEC. 102. (a) Section 5314 of title 5 of the United States Code is
amended by adding at the end thereof the following new paragraph:
"(60) Chairman, Commodity Futures Trading Commission."
(b) Section 5315 of title 5 of the United States Code is amended by
adding at the end thereof the following new paragraph:
1391
^^^^•
13^")^^^^ ''"'^ ''^^"'
^i^h°o^he^*i°"
cies. ^^ ^^^"
Experts and
'^°"^" tants.
contracts.
Expenses.
Appropriation.
Salaries.
chairman.
1392
Commissioners.
General Counsel.
Executive Director.
7 u s e 6, 6a,
6c-6g, 6i, 7, 7a,
8, 9, 11, 12, 12-1,
12a, 12b, 13b, 16.
7 u s e 7b, 8, 9,
12a, 13a-13c.
7 u s e 7a, 12,
12-1, 12a.
7 u s e 6, 6g.
6i, 7, 7a, 12-1.
Transfer of
personnel, property, e t c .
7 u s e 4a note.
Report to Congress.
7 u s e 12-2.
Reviews and
audits.
7 u s e 12-3.
PUBLIC LAW 93-463-OCT. 23, 1974
[88 STAT.
"(100) Members, Commodity Futures Trading Commission."
(c) Section 5316 of title 5 of the United States Code is amended by
adding at the end thereof the following new paragraphs:
"(135) General Counsel, Commodity Futures Trading Commission.
"(136) Executive Director, Commodity Futures Trading
Commission."
SEC. 103. The Commodity Exchange Act, as amended, is amended—
(a) By striking the word "Secretary" and the words "Secretary of
Agriculture" wherever such words appear therein (except where the
words "Secretary of Agriculture" first appear in section 5(a) (7
U.S.C. 7) or where said words would be stricken by subsection ( b ) ,
(c), or (d^ of this section) and by inserting in lieu thereof the word
"Commission".
(b) By striking the words "the Secretary of Agriculture or" wherever they appear in the phrase "the Secretary of Agriculture or the
Commission".
(c) By striking the words "the Secretary of Agriculture, who shall
thereupon notify the other members of" from section 6(a) thereof
(7U.S.C.8)._
(d) By striking "the Secretary of Agriculture (or any person designated by him)," from section 6(b) thereof (7 U.S.C. 15).
(e) By striking the word "he", "his", or " H e " wherever such word
is used therein to refer to the Secretary of Agriculture, and by inserting in lieu thereof the word "it", "its", or "It", respectively.
(f) By striking the words "United States Department of Agriculture" and "Department of Agriculture" wherever they appear therein
and by inserting in lieu thereof the word "Commission".
(g) By inserting in section 5(a) (7 U.S.C. 7) after the words "Secretary of Agriculture" where the same first appear therein the words
"or the Commission".
SEC. 104. All of the personnel of the Commodity Exchange Authority, property, records, and unexpended balance of appropriations,
allocations, and other funds employed, used, held, available, or to be
made available in connection with administration of the Commodity
Exchange Act shall be transferred to the Commodity Futures Trading
Commission upon the effective date of this Act.
SEC. 105. Section 8 of the Commodity Exchange Act, as amended
(7 U.S.C. 12, 12-1), is amended by adding at the end thereof the
following new paragraphs:
"The Commission shall submit to the Congress a written report
Avithin one hundred and twenty days after the end of each fiscal year
detailing the operations of the Commission during such fiscal year.
The Commission shall include in such report such information, data,
and recommendations for further legislation as it may deem advisable
with respect to the administration of this Act and its powers and
functions under this Act.
"The Comptroller General of the United States shall conduct
reviews and audits of the Commission and make reports thereon. For
the purpose of conducting such reviews and audits the Comptroller
General shall be furnished such information regarding the powers,
duties, organizations, transactions, operations, and activities of the
Commission as he may require and he and his duly authorized representatives shall, for the purpose of securing such information, have
access to and the right to examine any books, documents, papers, or
records of the Commission except that in his reports the Comptroller
General shall not include data and information which would separately disclose the business transactions of any person and trade secrets
88 STAT. ]
PUBLIC LAW 93-463-OCT. 23, 1974
or names of customers, although such data shall be provided upon
request by any committee of either House of Congress acting within
the scope of its jurisdiction."
SEC. 106. The Commodity Exchange Act, as amended, is amended
by adding at the end thereof the following new section:
"SEC. 14. (a) Any person complaining of any violation of any provision of this Act or any rule, regulation, or order thereunder by any
person registered under section 4d, 4e, 4k, or 4m of this Act may, at
any time within two years after the cause of action accrues, apply to
the Commission by petition, which shall briefly state the facts, whereupon, if, in the opinion of the Commission, the facts therein contained
warrant such action, a copy of the complaint thus made shall be
forwarded by the Commission to the respondent, who shall be called
upon to satisfy the complaint, or to answer it in writing, within a
reasonable time to be prescribed by the Commission.
" (b) If there appear to be, in the opinion of the Commission, any
reasonable grounds for investigating any complaint made under this
section, the Commission shall investigate such complaint and may, if
in its opinion the facts warrant such action, have said complaint served
by registered mail or by certified mail or otherwise on the respondent
and afford such person an opportunity for a hearing thereon before
an Administrative Law Judge designated by the Commission in any
place in which the said person is engaged in business: Provided^ That
in complaints wherein the amount claimed as damages does not exceed
the sum of $2,500, a hearing need not be held and proof in support of
the complaint and in support of the respondent's answer may he, supplied in the form of depositions or A^erified statements of fact.
"(c) After opportunity for hearing on complaints where the damages claimed exceed the sum of $2,500 has been provided or waived
and on complaints where damages claimed do not exceed the sum
of $2,500 not requiring hearing as provided herein, the Commission
shall determine whether or not the respondent has violated any provision of this Act or any rule, regulation, or order thereunder.
" ( d ) In case a complaint is made by a nonresident of the United
States, the complainant shall be required, before any formal action
is taken on his complaint, to furnish a bond in double the amount of
the claim conditioned upon the payment of costs, including a reasonable attorney's fee for the respondent if the respondent shall prevail,
and any reparation award that may be issued by the Commission
against the complainant on any counterclaim by respondent: Provided^ That the Commission shall have authority to waive the furnishing of a bond by a complainant who is a resident of a country which
permits the filing of a complaint by a resident of the United States
without the furnishing of a bond.
"(e) If after a hearing on a complaint made by any person under
subsection (a) of this section, or without hearing as provided in subsections (b) and (c) of this section, or upon failure of the party complained against to answer a complaint duly served within the time
prescribed, or to appear at a hearing after being duly notified, the
Commission determines that the respondent has violated any provision of this Act, or any rule, regulation, or order thereunder, the
Commission shall, unless the offender has already made reparation
to the person complaining, determine the amount of damage, if any,
to which such person is entitled as a result of such violation and shall
make an order directing the offender to pay to such person complaining such amount on or before the date fixed in the order. If, after
the respondent has filed his answer to the complaint, it appears therein
that the respondent has admitted liability for a portion of the amount
claimed in the complaint as damages, the Commission under such
1393
Complaints.
7 u s e 6d, 6 e .
Post, p p . 1397,
1398.
Investigation
and hearing.
Nonresidents
of U.S., b o n d s .
Reparation.
1394
PUBLIC LAW 93-463-OCT. 23, 1974
[88 STAT.
rules and regulations as it shall prescribe, unless the respondent has
already made reparation to the person complaining, may issue an
order directing the respondent to pay to the complainant the undisputed amount on or before the date fixed in the order, leaving the
respondent's liability for the disputed amount for subsequent determination. The remaming disputed amount shall be determined in the
same manner and under the same procedure as it would have been determined if no order had been issued by the Commission with respect
to the undisputed sum.
Enforcement of
"^f) jf ^ny persou agaiust whom an award has been made does not
reparation awar . ^^^ ^^^ reparation award within the time specified in the Commission's
order, the complainant, or any person for whose benefit such order was
made, within three years of the date of the order, may file a certified
copy of the order of the Commission, in the district court of the
United States for the district in which he resides or in which is located
the principal place of business of the respondent, for enforcement of
such reparation award by appropriate orders. The orders, writs, and
processes of such district court may in such case run, be served, and be
returnable anywhere in the United States. The petitioner shall not be
liable for costs in the district court, nor for costs at any subsequent state
of the proceedings, unless they accrue upon his appeal. If the petitioner
finally prevails, he shall be allowed a reasonable attorney's fee, to be
taxed and collected as a part of the costs of the suit. Subject to the right
of appeal under subsection (g) of this section, an order of the Commission awarding reparations shall be final and conclusive.
^PP^^'^"(g) Any order of the Commission entered hereunder shall be
reviewable on petition of any party aggrieved thereby, by the
United States Court of Appeals for any circuit in which a hearing was
held, or if no hearing was held, any circuit in which the appellee is
located, under the procedure provided in paragraph (b) of section 6 of
this Act. Such appeal shall not be effective unless within 30 days from
and after the date of the reparation order the appellant also files with
the clerk of the court a bond in double the amount of the reparation
awarded against the appellant conditioned upon the payment of the
judgment entered by the court, plus interest and costs, including a reasonable attorney's fee for the appellee, if the appellee shall prevail.
Such bond shall be in the form of cash, negotiable securities having a
market value at least equivalent to the amount of bond prescribed, or
the undertaking of a surety company on the approved list of sureties
issued by the Treasury Department of the United States. The appellee
shall not be liable for costs in said court. If the appellee prevails, he
shall be allowed a reasonable attorney's fee to be taxed and collected as
a part of his costs.
^^"^^*y" (h) Unless the registrant against whom a reparation order has been
issued shows to the satisfaction of the Commission within fifteen days
from the expiration of the period allowed for compliance with such
order that he has either taken an appeal as herein authorized or has
made payment in full as required by such order, he shall be prohibited
from trading on all contract markets and his registration shall be suspended automatically at the expiration of such fifteen-day period until
he shows to the satisfaction of the Commission that he has paid the
amount therein specified with interest thereon to date of payment:
Provided, That if on appeal the appellee prevails or if the appeal is
dismissed the automatic prohibition against trading and suspension of
registration shall become effective at the expiration of thirty days
from the date of judgment on the appeal, but if the judgment is stayed
by a court of competent jurisdiction the suspension shall become effective ten days after the expiration of such stay, unless prior thereto the
judgment of the court has been satisfied.
STAT. ]
1395
PUBLIC LAW 93-463-OCT. 23, 1974
"(i) The provisions of this section shall not become effective until
one year after the date of its enactment: Provided^ That claims which
arise within nine months immediately prior to the effective date of this
section may be heard by the Commission after such one year period."
SEC. 107. The Commodity Exchange Act, as amended, is amended
by adding at the end thereof the following new section:
"SEC. 15. The Commission shall take into consideration the public
interest to be protected by the antitrust laws and endeavor to take
the least anticompetitive means of achieving the objectives of this Act,
as well as the policies and purposes of this Act, in issuing any order
or adopting any Commission rule or regulation, or in requiring or
approving any bylaw, rule, or regulation of a contract market or registered futures association established pursuant to section 17 of this
Act."
Effective d a t e .
Post,
p. 1406.
T I T L E I I — R E G U L A T I O N O F T R A D I N G AND E X C H A N G E
ACTIVITIES
SEC. 201. Section 2(a) of the Commodity Exchange Act, as amended
(7 U.S.C. 2,4), is amended—
(a) By striking after the word "eggs," the word "onions,".
(b) By striking the period at the end of the third sentence of the
section and substituting therefor the following: ", and all other goods
and articles, except onions as provided in Public Law 85-839, and all
services, rights, and interests in which contracts for future delivery
are presently or in the future dealt in: Provided^ That the Commission shall have exclusive jurisdiction with respect to accounts, agreements (including any transaction which is of the character of, or is
commonly known to the trade as, an 'option', 'privilege', 'indemnity',
'bid', 'offer', 'put', 'call', 'advance guaranty', or 'decline guaranty'),
and transactions involving contracts of sale of a commodity for future
delivery, traded or executed on a contract market designated pursuant
to section 5 of this Act or any other board of trade, exchange, or market, and transactions subject to regulation by the Commission pursuant
to section 217 of the Commodity Futures Trading Commission Act of
1974: And provided further^ That, except as hereinabove provided,
nothing contained in this section shall (i) supersede or limit the jurisdiction at any time conferred on the Securities and Exchange Commission or other regulatory authorities under the laws of the United
States or of any State, or (ii) restrict the Securities and Exchange
Commission and such other authorities from carrying out their duties
and responsibilities in accordance with such laws. Nothing in this section shall supersede or limit the jurisdiction conferred on courts of
the United States or any State. Nothing in this Act shall be deemed
to govern or in any way be applicable to transactions in foreign
currency, security warrants, security rights, resales of installment
loan contracts, repurchase options, government securities, or mortgages and mortgage purchase commitments, unless such transactions
involve the sale thereof for future delivery conducted on a board of
trade."
SEC. 202. Section 2(a) of the Commodity Exchange Act, as amended
(7 U.S.C. 2, 4), is amended by adding at the end of paragraph (1)
the following new sentences: "The term 'commodity trading advisor'
shall mean any person who, for compensation or profit, engages in
the business of advising others, either directly or through publications or writings, as to the value of commodities or as to the advisability of trading in any commodity for future delivery on or
subject to the rules of any contract market, or who for compensation
7 u s e 13-1.
J u r i s d i c t i o n of
Commission.
7 u s e 7.
Post, p . 1405.
S E e and other
authorities.
Courts.
Nonapplic ability.
"Commodity
trading advisor.
1396
"Commodity
pool operator.'
T r a d e s and executions by floor
brokers.
7 u s e 6j.
Notice and
hearing.
T r a d e s by
futures commission m e r c h a n t s .
Notice and
hearing.
PUBLIC LAW 93-463-OCT. 23, 1974
[88
STAT.
or profit, and as part of a regular business, issues or promulgates
analyses or reports concerning commodities; but does not include
(i) any bank or trust company, (ii) any newspaper reporter, newspaper columnist, newspaper editor, lawyer, accountant, or teacher,
(iii) any floor broker or futures commission merchant, (iv) the publisher of any bona fide newspaper, news magazine, or business or
financial publication of general and regular circulation including
their employees, (v) any contract market, and (vi) such other persons
not within the intent of this definition as the Commission may specify
by rule, regulation, or order: Provided^ That the furnishing of such
services by the foregoing persons is solely incidental to the conduct of
their business or profession. The term 'commodity pool operator' shall
mean any person engaged in a business which is of the nature of an
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 any commodity for future delivery on
or subject to the rules of any contract market, but does not include
such persons not within the intent of this definition as the Commission may specify by rule or regulation or by order."
SEC. 203. The Commodity Exchange Act, as amended, is amended
by inserting after section 4i (7 U.S.C. 6i), the following new section:
"SEC. 4j. (1) The Commission shall within six months after the
effective date of the Commodity Futures Trading Commission Act of
1974, and subsequently when it determines that changes are required,
make a determination, after notice and opportunity for hearing,
whether or not a floor bioker may trade for his own account or any
account in which such broker has trading discretion, and also execute
a customer's order for futui'e delivery and, if the Commission determines that such trades and such executions shall be permitted, the
Commission shall further determine the terms, conditions, and circumstances under which such trades and such executions shall be conducted : Provided^ That any such determination shall, at a minimum,
take into account the effect upon the liquidity of trading of each
market: And provided further^ That nothing herein shall be construed to prohibit the Commission from making separate determinations for different contract markets when such are warranted in the
judgment of the Commission, or to prohibit contract markets from
setting terms and conditions more restrictive than those set by the
Commission.
" (2) The Commission shall within six months after the effective date
of the Commodity Futures Trading Commission Act of 1974, and subsequently when it determines that changes are required, make a determination, after notice and opportunity for hearing, whether or not a
futures commission merchant may trade for its own account or any
proprietary account, as defined by the Commission, and if the Commission determines that such trades shall be permitted, the Commission
shall further determine the terms, conditions, and circumstances under
which such trades shall be conducted: Provided^ That any such determination, at a minimum, shall take into account the effect upon the
liquidity of trading of each market: And provided fvHher^ That nothing herein shall be construed to prohibit the Commission from making
separate determinations for different contract markets when such are
warranted in the judgment of the Commission, or to prohibit contract
markets from setting terms and conditions more restrictive than those
set by the Commission."
SEC. 204. (a) The Commodity Exchange Act, as amended, is
amended by adding the following new section :
88 STAT. ]
PUBLIC LAW 93-463-OCT. 23, 1974
1397
"SEC. 4k. (1) I t shall be unlawful for any person to be associated , Associates of
. ,
1. r
^
•
•
^
,
•,^
j_
_c
J- ,
with any futures commission merchant or with any agent ot a futures
commission merchant as a partner, officer, or employee (or any person
occupying a similar status or performing similar functions), in any
capacity which involves (i) the solicitation or acceptance of customers'
orders (other than in a clerical capacity) or (ii) the supervision of any
person or persons so engaged, unless such person shall have registered,
under this Act, with the Commission and such registration shall not
have expired nor been suspended (and the period of suspension has not
expired) or revoked, and it shall be unlawful for any futures commission merchant or any agent of a futures commission merchant to permit such a person to become or remain associated with him in any such
capacity if such futures commission merchant or agent knew or should
have known that such person was not so registered or that such registration had expired, been suspended (and the period of suspension has
not expired) or revoked: Provided, That any individual who is registered as a floor broker or futures commission merchant (and such registration is not suspended or revoked) need not also register under
these provisions.
"(2) Any such person desiring to be registered shall make application to the Commission in the form and manner prescribed by the
Commission, giving such information and facts as the Commission
may deem necessary concerning the applicant. Such person, when
registered hereunder, shall likewise continue to report and furnish to
the Commission such information as the Commission may require.
Such registration shall expire two years after the effective date thereof,
and shall be renewed upon application therefor unless the registration
has been suspended (and the period of such suspension has not
expired) or revoked after notice and hearing as prescribed in section
6(b) of this Act: Provided, That upon initial registration, the effective period of such registration shall be set by the Commission, not to
exceed two years from the effective date thereof and not to be less than
one year from the effective date thereof."
(b) Section 6(b) of the Commodity Exchange Act, as amended (7
U.S.C. 9), is amended by inserting after the words "futures commission merchant" each time those words appear, the following: "or any
person associated therewith as described in section 4k of this Act,".
(c) Section 8a (1) of the Commodity Exchange Act, as amended
(7 U.S.C. 1 2 a ( l ) ) , is amended by inserting after the words "futures
commission merchants" the following: "and persons associated therewith as described in section 4k of this Act,".
SEC. 205. (a) The Commodity Exchange Act, as amended, is
amended by adding the following new sections:
"SEC. 41. It is hereb}^ found that the activities of commodity trading
advisors and commodity pool operators are affected with a national
public interest in that, among other things—
"(1) their advice, counsel, publications, writings, analyses, and
reports are furnished and distributed, and their contracts, solicitations, subscriptions, agreements, and other arrangements with
clients take place and are negotiated and performed by the use of
the mails and other means and instrumentalities of interstate
commerce;
"(2) their advice, counsel, publications, writings, analyses, and
reports customarily relate to and their operations are directed
toward and cause the purchase and sale of commodities for future
delivery on or subject to the rules of contract markets; and
" (3) the foregoing transactions occur in such volume as to affect
substantially transactions on contract markets.
futures commis-
sion merchants.
Registrauon.
Application.
in^°advi°slVs^Ind'''
c^mmodurpoo"
operators.
^ "^^ ^ "
1398
Use of mails
and i n t e r s t a t e
commerce.
7 u s e 6m.
Registration.
7 u s e 6n.
Recordkeeping
and r e p o r t s .
PUBLIC LAW 93-463-OCT. 23, 1974
[88 STAT.
"SEC. 4m. I t shall be unlawful for any commodity trading advisor
or commodity pool operator, unless registered under this Act, to make
use of the mails or any means or instrumentality of interstate commerce in connection with his business as such commodity trading
advisor or commodity pool operator: Provided^ That the provisions of
this section shall not apply to any commodity trading advisor who,
during the course of the preceding twelve months, has not furnished
commodity trading advice to more than fifteen persons and who does
not hold himself out generally to the public as a commodity trading
advisor.
"SEC. 4n. (1) Any commodity trading advisor or commodity pool
operator, or any person who contemplates becoming a commodity
trading advisor or commodity pool operator, may register under this
Act by filing an application with the Commission. Such application
shall contain such information, in such form and detail, as the Commission may, by rules and regulations, prescribe as necessary or appropriate in the public interest, including the following:
" ( A ) the name and form of organization, including capital
structure, under which the applicant engages or intends to engage
in business; the name of the State under the laws of which he is
organized; the location of his principal business office and branch
offices, if any; the names and addresses of all partners, officers,
directors, and persons performing similar functions or, if the
applicant be an individual, of such individual; and the number of
employees;
" ( B ) the education, the business affiliations for the past ten
years, and the present business affiliations of the applicant and of
his partners, officers, directors, and persons performing similar
functions and of any controlling person thereof;
" ( C ) the nature of the business of the applicant, including the
manner of giving advice and rendering of analyses or reports;
" ( D ) the nature and scope of the authority of the applicant
with respect to clients' funds and accounts;
" ( E ) the basis upon which the applicant is or will be compensated; and
" ( F ) such other information as the Commission may require
to determine whether the applicant is qualified for registration.
"(2) Except as hereinafter provided, such registration shall become
effective thirty days after the receipt of such application by the Commission, or within such shorter period of time as the Commission may
determine.
"(3) All registrations under this section shall expire on the 30th
day of June of each year, and shall be renewed upon application therefor subject to the same requirements as in the case of an original application.
"(4) (A) Every commodity trading advisor and commodity pool
operator registered under this Act shall maintain books and records
and file such reports in such form and manner as may be prescribed
by the Commission. All such books and records shall be kept for a
period of at least three years, or longer if the Commission so directs,
and shall be open to inspection by any representative of the Commission or the Department of Justice. Upon the request of the Commission, a registered commodity trading advisor or commodity pool
operator shall furnish the name and address of each client, subscriber, or participant, and submit samples or copies of all reports,
letters, circulars, memorandums, publications, writings, or other literature or advice distributed to clients, subscribers, or participants, or
prospective clients, subscribers, or participants.
88 STAT. ]
PUBLIC LAW 93-463-OCT. 23, 1974
1399
Disclosure.
" ( B ) Unless otherwise authorized by the Commission by rule or
regulation, all commodity trading advisors and commodity pool
operators shall make a full and complete disclosure to their subscribers,
clients, or participants of all futures market positions taken or held
by the individual principals of their organization.
Statements of
"(5) Every commodity pool operator shall regularly furnish state- account.
ments of account to each participant in his operations. Such statements
shall be in such form and manner as may be prescribed by the Commission and shall include complete information as to the current status
of all trading accounts in which such participant has an interest.
"(6) The Commission is authorized, without hearing, to deny regisDenial of registration to any person as a commodity trading advisor or commodity "^^''°"pool operator if such person is subject to an outstanding order under
this Act denying to such person trading privileges on any contract
market, or suspending or revoking the registration of such person as
a commodity trading advisor, commodity pool operator, futures commission merchant, or floor broker, or suspending or expelling such
person from membership on any contract market.
"(7) The Commission after hearing may by order deny registration,
revoke or suspend the registration of any commodity trading advisor
or commodity pool operator if the Commission finds that such denial,
revocation, or suspension is in the public interest and that—
" ( A ) the operations of such person disrupt or tend to disrupt
orderly marketing conditions, or cause or tend to cause sudden or
unreasonable fluctuations or unwarranted changes in the prices of
commodities;
" ( B ) such commodity trading advisor or commodity pool operator, or any partner, officer, director, person performing similar
function or controlling person thereof—
" ( i ) has within ten years of the issuance of such order
been convicted of any felony or misdemeanor involving the
purchase or sale of any commodity or security, or arising
out of any conduct or practice of such commodity trading
advisor or commodity pool operator or affiliated person as a
commodity trading advisor or commodity pool operator; or
"(ii) at the time of the issuance of such order, is permanently or temporarily enjoined by order, judgment or decree
of any court of competent jurisdiction from acting as a commodity trading advisor, commodity pool operator, futures
commission merchant, or floor broker, or as an affiliated person or employee of any of the foregoing, or from engaging
in or continuing any conduct or practice in connection with
any such activity or in connection with the purchase or sale
of commodities or securities; or
" ( C ) any partner, officer, or director of such commodity trading
advisor or commodity pool operator, or any person performing
a similar function or any controlling person thereof is subject
to an outstanding order of the Commission denying trading privileges on any contract market to such person, or suspending or
revoking the registration of such person as a commodity trading
advisor, commodity pool operator, futures commission merchant,
or floor broker, or suspending or expelling such person from
membership on any contract market.
"SEC. 4O. (1) I t shall be unlawful for any commodity ti-ading advisor ^ use 6°.
or commodity pool operator registered under this Act, by use of the
mails or any means or instrumentality of interstate commerce, directly
or indirectly—
" (A) to employ any device, scheme, or artifice to defraud any
client or participant or prospective client or participant; or
PUBLIC LAW 93-463-OCT. 23, 1974
1400
Standards and
examinations.
7 u s e 6P.
Post,
p. 1406.
Contract markets.
[88
STAT.
" ( B ) to engage in any transaction, practice, or course of business which operates as a fraud or deceit upon any client or participant or prospective client or participant.
"(2) I t shall be unlawful for any commodity trading advisor or
commodity pool operator registered under this Act to represent or
imply in any manner whatsoever that he has been sponsored, recommended, or approved, or that his abilities or qualifications have in
any respect been passed upon by the United States or any agency or
oflS.cer thereof: Provided, That this section shall not be construed to
prohibit a statement that a person is registered under this Act as a
commodity trading advisor or commodity pool operator, if such statement is true in fact and if the effect of such registration is not misrepresented."
(b) Section 6(b) of the Commodity Exchange Act, as amended
(7 U.S.C. 9), is amended by inserting immediately before the words
"or as floor broker" each time those words appear, the following:
"commodity trading advisor, commodity pool operator,".
(c) Section 8a (1) of the Commodity Exchange Act, as amended
(7 U.S.C. 12a(1)), is amended by inserting immediately before the
words "and floor brokers" the following: "commodity trading advisors, commodity pool operators.".
SEC. 206, The Commodity Exchange Act, as amended, is amended
by adding the following new section:
"SEC. 4p. The Commission may specify by rules and regulations
appropriate standards with respect to training, experience, and such
other qualifications as the Commission finds necessary or desirable to
insure the fitness of futures commission merchants, floor brokers, and
those persons associated with futures commission merchants or floor
brokers. In connection therewith, the Commission may prescribe by
rules and regulations the adoption of written proficiency examinations
to be given to applicants for registration as futures commission merchants, floor brokers, and those persons associated with futures commission merchants or floor brokers, and the establishment of reasonable
fees to be charged to such applicants to cover the administration of
such examinations. The Commission may further prescribe by rules
and regulations that, in lieu of examinations administered by the
Commission, futures associations registered under section 17 of this
Act or contract markets may adopt written proficiency examinations
to be given to applicants for registration as futures commission merchants, floor brokers, and those persons associated with futures commission merchants or floor brokers, and charge reasonable fees to such
applicants to cover the administration of such examinations. Notwithstanding any other provision of this section, the Commission may
specify by rules and regulations such terms and conditions as it deems
appropriate to protect the public interest wherein exception to any
written proficiency examination shall be made with respect to individuals who have demonstrated, through training and experience, the
degree of proficiency and skill necessary to protect the interests of the
customers of futures commission merchants and floor brokers."
SEC. 207. Section 5 of the Commodity Exchange Act, as amended
(7 U.S.C. 7), is amended by adding after subsection (f) thereof the
following new subsection:
"(g) When such board of trade demonstrates that transactions for
future delivery in the commodity for which designation as a contract
market is sought will not be contrary to the public interest."
SEC. 208. Section 5a of the Commodity Exchange Act, as amended
(7 U.S.C. 7a), is amended—
88
STAT.]
1401
PUBLIC LAW 93-463-OCT. 23. 1974
(a) By inserting after the word "purposes" in subsection (7) the
following: " : And provided further, That this subsection shall ap{)ly
only to futures contracts for those commodities which may be delivered from a warehouse subject to the United States Warehouse Act".
(b) By striking out "and" at the end of subsection (8).
(c) By striking out the period at the end of subsection (9) and inserting in lieu thereof a semicolon.
(d) By adding at the end of subsection (9) thereof the following
new subsection:
"(10) permit the delivery of any commodity, on contracts of
sale thereof for future delivery, of such grade or grades, at such
point or points and at such quality and locational price differentials as will tend to prevent or diminish price manipulation, market congestion, or the abnormal movement of such commodity in
interstate commerce. If the Commission after investigation finds
that the rules and regulations adopted by a contract market permitting delivery of any commodity on contracts of sale thereof
for future delivery, do not accomplish the objectives of this subsection, then the Commission shall notify the contract market of
its finding and afford the contract market an opportunity to make
appropriate changes in such rules and regulations. If the contract
market within seventy-five days of such notification fails to make
the changes which in the opinion of the Commission are necessary
to accomplish the objectives of this subsection, then the Commission after granting the contract market an opportunity to be
heard, may change or supplement such rules and regulations of
the contract market to achieve the above objectives: Provided,
That any order issued under this paragraph shall not apply to
contracts of sale for future delivery in any months in which contracts are currently outstanding and open : And jrrovided further,
That no requirement for an additional delivery point or points
shall be promulgated following hearings until the contract market affected has had notice and opportunity to file exceptions to
the proposed order determining the location and number of such
delivery point or points;".
SEC. 209. Section 5a of the Commodity Exchange Act, as amended
(7 U.S.C. 7a), is amended by adding a new subsection (11) as
follows:
"(11) provide a fair and equitable procedure through arbitration or otherwise for the settlement of customers' claims and
grievances against any member or employee thereof: Provided,
That (i) the use of such procedure by a customer shall be voluntary, (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 between the parties, and
(iv) the term 'customer' as used in this subsection shall not include
a futures commission merchant or a floor broker; and".
SEC. 210. Section 5a of the Commodity Exchange Act, as amended
(7 U.S.C. 7a), is amended by inserting the following new subsection
(12) as follows:
"(12) except as otherwise provided in this subsection, submit
to the Commission for its approval all bylaws, rules, regulations,
and resolutions made or issued by such contract market, or by
the governing board thereof or any committee thereof which
relate to terms and conditions in contracts of sale to be executed on
or subject to the rules of such contract market or relate to other
trading requirements except those relating to the setting of
levels of margin. The Commission shall approve, within thirty
days of their receipt unless the Commission notifies the contract
7 u s e 241.
Delivery points.
Customers'
c l a i m s , arbitration.
Commission approval of b y l a w s ,
r u l e s , regulations,
and r e s o l u t i o n s .
1402
Court action.
7 use i3a-i.
PUBLIC LAW 93-463-OCT. 23, 1974
[88 STAT.
market of its inability to make such determination within such
period of time, such bylaws, rules, regulations, and resolutions
upon a determination that such bylaws, rules, regulations, and
resolutions are not in violation of the provisions of this Act or
the regulations of the Commission and thereafter the Commission shall disapprove, after appropriate notice and opportunity
for hearing, any bylaw, rule, regulation, or resolution which the
Commission finds at any time is in violation of the provisions of
this Act or the regulations of the Commission. The Commission
shall specify the terms and conditions under which a contract
market may, in an emergency, as defined by the Commission,
adopt a temporary rule dealing with trading requirements without prior Commission approval. In the event of such an emergency, as defined by the Commission, requiring immediate action,
the contract market by a two-thirds vote of its governing board
may place into immediate effect without prior Commission
approval a temporary rule dealing with such emergency if it notifies the Commission of such action with a complete explanation of
the emergency involved. The Commission may adopt a regulation
exempting enumerated types of contract market operational and
administrative rules from the requirement that they be submitted
to the Commission for its approval."
gj,(._ 211. Thc Commodlty Exchange Act, as amended, is amended
by inserting the following new section immediately after section 6b
(7 U.S.C. 13a) :
"SEC. 6C. Whenever it shall appear to the Commission that any
contract market or other person has engaged, is engaging, or is about
to engage in any act or practice constituting a violation of any provision of this Act or any rule, regulation, or order thereunder, or is
restraining trading in any commodity for future delivery, the Commission may bring an action in the proper district court of the United
States or the proper United States court of any territory or other
place subject to the jurisdiction of the United States, to enjoin such
act or practice, or to enforce compliance with this Act, or any rule,
regulation or order thereunder, and said courts shall have jurisdiction
to entertain such actions: Provided^ That no restraining order or
injunction for violation of the provisions of this Act shall be issued
ex parte by said court. Upon a proper showing, a permanent or temporary injunction or restraining order shall be granted without bond.
I Jpon application of the Commission, the district courts of the United
States and the United States courts of any territory or other place
subject to the jurisdiction of the United States shall also have jurisdiction to issue writs of mandamus, or orders affording like relief,
commanding any person to comply with the provisions of this Act
or any rule, regulation, or order of the Commission thereunder, including the requirement that such person take such action as is necessary
to remove the danger of violation of this Act or any such rule, regulation, or order: Provided^ That no such writ of mandamus, or order
affording like relief, shall be issued ex parte. Any action under this
section may be brought in the district wherein the defendant is found
or is an inhabitant or transacts business or in the district where the
act or practice occurred, is occurring, or is about to occur, and process
in such cases may be served in any district in which the defendant is
an inhabitant or wherever the defendant may be found. In lieu of
bringing actions itself pursuant to this section, the Commission may
request the Attorney General to bring the action. Where the Commission elects to bring the action, it shall inform the Attorney General of
such suit and advise him of subsequent developments."
88 STAT. ]
PUBLIC LAW 93-463-OCT. 23, 1974
SEC. 212. (a) Section 6 of the Commodity Exchange Act, as
amended (7 U.S.C. 8, 9, 13b, 15), is amended—
(1) By substituting a comma for the period at the end of the
fourth sentence in paragraph (b) and adding thereafter the following : "and may assess such person a civil penalty of not more
than $100,000 for each such violation."
(2) By adding in the sixth sentence in paragraph ( b ) , a comma
after the word "petition" and inserting thereafter and before
the word "praying" the following phrase: "within fifteen days
after the notice of such order is given to the offending pei'son.".
(3) By adding after paragraph (c) thereof the following new
paragraph:
" ( d ) I n determining the amount of the money penalty assessed
under paragraph (b) of this section, the Commission shall consider, in
the case of a person whose primary business involves the use of the
commodity futures market—the appropriateness of such penalty to
the size of the business of the person charged, the extent of such person's ability to continue in business, and the gravity of the violation;
and in the case of a person whose primary business does not involve
the use of the commodity futures market—the appropriateness of such
penalty to the net worth of the person charged, and the gravity of the
violation. If the offending person upon whom such penalty is imposed,
after the lapse of the period allowed for appeal or after the affirmance
of such penalty, shall fail to pay such penalty the Commission shall
refer the matter to the Attorney General who shall recover such
penalty by action in the appropriate United States district court."
(b) Section 6b of the Commodity Exchange Act, as amended (7
U.S.C. 13a), is amended to read as follows:
"SEC. 6b. I f any contract market is not enforcing or has not enforced
its rules of government made a condition of its designation as set
forth in section 5 of this Act, or if any contract market, or any director, officer, agent, or employee of any contract market otherwise is
violating or has violated any of the provisions of this Act or any of
the rules, regulations, or orders of the Commission thereunder, the
Commission may, upon notice and hearing and subject to appeal as in
other cases provided for in paragraph (a) of section 6 of this Act,
make and enter an order directing that such contract market, director,
officer, agent, or employee shall cease and desist from such violation,
and assess a civil penalty of not more than $100,000 for each such violation. If such contract market, director, officer, agent, or employee,
after the entry of such a cease and desist order and the lapse of the
period allowed for appeal of such order or after the affirmance of such
order, shall fail or refuse to obey or comply with such order, such contract market, director, officer, agent, or employee shall be guilty of a
misdemeanor and, upon conviction thereof, shall be fined not more
than $100,000 or imprisoned for not less than six months nor more
than one year, or both. Each day during which such failure or refusal
to obey such cease and desist order continues shall be deemed a separate
offense. If the offending contract market or other person upon whom
such penalty is imposed, after the lapse of the period allowed for
appeal or after the affirmance of such penalty, shall fail to pay such
penalty, the Commission shall refer the matter to the Attorney General
who shall recover such penalty by action in the appropriate United
States district court. I n determining the amount of the money penalty
assessed under this section, the Commission shall consider the appropriateness of such penalty to the net worth of the offending person
and the gravity of the offense, and in the case of a contract market
shall further consider whether the amount of the penalty will mate-
1403
Penalties.
7 use 9a.
Notice and
hearing.
1404
PUBLIC LAW 93-463-OCT. 23, 1974
[88 STAT.
rially impair the contract market's ability to carry on its operations
and duties."
(c) Section 6(c) of the Commodity Exchange Act, as amended (7
U.S.C. 13b), is amended by deleting the words "not less than $500 nor
more than $10,000" and substituting therefor the words "not more
than $100,000".
(d) Section 9 of the Commodity Exchange Act, as amended (7
U.S.C. 13), is amended as follows:
(1) Subsection (a) is amended by striking "$10,000" and substituting therefor "$100,000".
(2) Subsection (b) is amended by striking "$10,000" and substituting therefor "$100,000".
(3) Subsection (c) is amended by striking "$10,000" and substituting therefor "$100,000".
rufJl^of comract
^EC. 213. Scctiou 8a of the Commodity Exchange Act, as amended
market.
(7 U.S.C. 12a), is amcudcd by striking subsection (7) and inserting
in lieu thereof the following new subsection:
"(7) to alter or supplement the rules of a contract market insofar as necessary or appropriate by rule or regulation or by order,
if after making the appropriate request in writing to a contract
market that such contract market effect on its own behalf specified
changes in its rules and practices, and after appropriate notice
and opportunity for hearing, the Commission determines that
such contract market has not made the changes so required, and
that such changes are necessary or appropriate for the protection of persons producing, handling, processing, or consuming
any commodity traded for future delivery on such contract market, or the product or byproduct thereof, or for the protection of
traders or to insure fair dealing in commodities traded for future
delivery on such contract market. Such rules, regulations, or
orders may specify changes with respect to such matters as:
" ( A ) terms or conditions in contracts of sale to be executed
on or subject to the rules of such contract market;
" ( B ) the form or manner of execution of purchases and
sales for future delivery;
" ( C ) other trading requirements, excepting the setting of
levels of margin;
" ( D ) safeguards with respect to the financial responsibility of members;
" ( E ) the manner, method, and place of soliciting business,
including the content of such solicitations; and
" ( F ) the form and manner of handling, recording, and
accounting for customers' orders, transactions, and accounts;
Rules for
er-
^"^"•
sons not memb"^rs
SEC. 214. Ssction 8a of the Commodity Exchange Act, as amended
of a contract mar- (7 U.S.C. 12a), is amended by adding the following new subsection
""''•
Emergencies.
( 8 ) :
"(8) to make and promulgate such rules and regulations with
respect to those persons registered under this Act, who are not
members of a contract market, as in the judgment of the Commission are reasonably necessary to protect the public interest and
promote just and equitable principles of trade, including but not
limited to the manner, method, and place of soliciting business,
including the content of such solicitation; and".
g ^ 215. Sectiou 8a of the Commodity Exchange Act, as amended
(7 U.S.C. 12a), is amended by adding the following new subsection
(9):
88 STAT. ]
PUBLIC LAW 93-463-OCT. 23, 1974
" ( 9 ) to direct the contract market whenever it has reason to
believe that an emergency exists, to take such action as, in the
Commission's judgment, is necessary to maintain or restore
orderly trading in, or liquidation of, any futures contract. The
term 'emergency' as used herein shall mean, in addition to threatened or actual market manipulations and corners, any act of the
United States or a foreign government affecting a commodity or
any other major market disturbance which prevents the market
from accurately reflecting the forces of supply and demand for
such commodity: Provided, That nothing herein shall be deemed
to limit the meaning or interpretation given by a contract market
to the terms 'market emergency', 'emergency', or equivalent language in its own bylaws, rules, regulations, or resolutions."
SEC. 216. The Commodity Exchange Act, as amended, is amended
by inserting the following new section immediately after section 8b
(7U.S.C.12b):
"SEC. 8C. (1) (A) Any exchange or the Commission if the exchange
fails to act, may suspend, expel, or otherwise discipline any person who
is a member of that exchange, or deny any person access to the
exchange. Any such action shall be taken solely in accordance with the
rules of that exchange.
" ( B ) Any suspension, expulsion, disciplinary, or access denial
procedure established by an exchange rule shall provide for written
notice to the Commission and to the person who is suspended, expelled,
or disciplined, or denied access, within thirty days, which includes
the reasons for the exchange action in the form and manner the Commission prescribes. Otherwise the notice and reasons shall be kept
confidential.
"(2) The Commission may, in its discretion and in accordance with
such standards and procedures as it deems appropriate, review any
decision by an exchange whereby a person is suspended, expelled,
otherwise disciplined, or denied access to the exchange. I n addition,
the Commission may, in its discretion and upon application of any
person who is adversely affected by any other exchange action, review
such action.
"(3) The Commission may affirm, modify, set aside, or remand any
exchange decision it reviews pursuant to subsection (2), after a determination on the record whether the action of the exchange was in
accordance with the policies of this Act. Subject to judicial review, any
order of the Commission entered pursuant to subsection (2) shall
govern the exchange in its further treatment of the matter.
"(4) The Commission, in its discretion, may order a stay of any
action taken pursuant to subsection (1) pending review thereof."
SEC. 217. (a) No person shall offer to enter into, enter into, or confirm
the execution of any transaction for the delivery of silver bullion, gold
bullion, or bulk silver coins or bulk gold coins, pursuant to a standardized contract commonly known to the trade as a margin account,
margin contract, leverage account, or leverage contract contrary to
any rule, regulation, or order of the Commodity Futures Trading Commission designed to insure the financial solvency of the transaction or
prevent manipulation or fraud: Provided, That such rule, regulation,
or order may be made only after notice and opportunity for hearing.
If the Commission determines that any such transaction is a contract
for future delivery within the meaning of the Commodity Exchange
Act, as amended, such transaction shall be regulated in accordance
with the provisions of such Act.
(b) The provisions of section 9(c) of the Commodity Exchange
Act, as amended, shall be applicable with respect to persons who
violate the provisions of this section.
1405
"Emergency."
ac^^on!^^'"^'''
^ ^^^ ^^c.
Notice.
jractYfor ouTand
silver.
^ ^^^ ^^a.
Penalty.
^ "^^ ^^'
1406
PUBLIC LAW 93-463-OCT. 23, 1974
[88 STAT.
TITLE III—ENABLING AUTHOKITY FOR CREATION OF
NATIONAL FUTURES ASSOCIATIONS
7 use 21.
Ante,
p . 1397.
SEC. 301. The Commodity Exchange Act, as amended, is amended
by adding the following new section:
"SEC. 17. (a) Any association of persons may be registered with
the Commission as a registered futures association pursuant to subsection (b) of this section, under the terms and conditions hereinafter
provided in this section, by filing with the Commission for review and
approval a registration statement in such form as the Commission
may prescribe, setting forth the information, and accompanied by the
documents, below specified:
"(1) Data as to its organization, membership, and rules of procedure, and such other information as the Commission may by rules
and regulations require as necessary or appropriate in the public
interest; and
"(2) Copies of its constitution, charter, or articles of incorporation
or association, with all amendments thereto, and of its bylaws, and
of any rules or instruments corresponding to the foregoing, whatever
the name, hereinafter in this section collectively reterred to as the
'rules of the association'.
"(b) An applicant association shall not be registered as a futures
association unless the Commission finds, under standards established
by the Commission, that—
" (1) such association is in the public interest and that it will be
able to comply with the provisions of this section and the rules
and regulations thereunder and to carry out the purposes of this
section;
"(2) the rules of the association provide that any person registered under this Act, contract market, or any other person designated pursuant to the rules of the Commission as eligible for
membership may become a member of such association, except
such as are excluded pursuant to paragraph {'6) or (4) of this
subsection, or a rule of the association permitted under this paragraph. The rules of the association may restrict membership in
such association on such specified basis relating to the type of
business done by its members, or on such other specified and
appropriate basis, as appears to the Commission to be necessary or
appropriate in the public interest and to carry out the purpose of
this section. Rules adopted by the association may provide that
the association may, unless the Commission directs otherwise in
cases in which the Commission finds it appropriate in the public
interest so to direct, deny admission to, or refuse to continue in
such association any person if (i) such person, whether prior or
subsequent to becoming registered as such, or (ii) any person
associated with in the meaning of 'associated person' as set forth
in section 4k of this Act, whether prior or subsequent to becoming
so associated, has been and is suspended or expelled from a contract market or has been and is barred or suspended from being
associated with all members of such contract market, for violation
of any rule of such contract market;
"(3) the rules of the association provide that, except with the
approval or at the direction of the Commission in cases in which
the Commission finds it appropriate in the public interest so to
approve or direct, no person shall be admitted 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 contract market or has
88 STAT. ]
PUBLIC LAW 93-463-OCT. 23, 1974
been and is barred or suspended from being associated with
all members of such association or from being associated with
all members of such contract market, for violation of any rule
of such association or contract market which prohibits any
act or transaction constituting conduct inconsistent with just
and equitable principles of trade, or requires any act the
omission of which constitutes conduct inconsistent with just
and equitable principles of trade; or
" ( B ) is subject to an order of the Commission denying,
suspending, or revoking his registration pursuant to section
6(b) of this Act (7 U.S.C. 9), or expelling or suspending him
from membership in a registered futures association or a contract market, or barring or suspending him from being associated with a futures commission merchant; or
" ( C ) whether prior or subsequent to becoming a member,
by his conduct while associated with a member, was a cause
of any suspension, expulsion, or order of the character
described in clause (A) or (B) which is in effect with respect
to such member, and in entering such a suspension, expulsion,
or order, the Commission or any such contract market or
association shall have jurisdiction to determine whether or
not any person was a cause thereof; or
" ( D ) has associated with him any person who is known,
or in the exercise of reasonable care should be known, to him
to be a person who would be ineligible for admission to or
continuance in membership under clause ( A ) , ( B ) , o r ( C )
of this paragraph.
"(4) the rules of the association provide that, except with the
approval or at the direction of the Commission in cases in which
the Commission finds it appropriate in the public interest so to
approve or direct, no person shall become a member and no natural person shall become a person associated with a member, unless
such person is qualified to become a member or a person associated
with a member in conformity with specified and appropriate
standards with respect to the training, experience, and such other
qualifications of such person as the association finds necessary or
desirable, and in the case of a member, the financial responsibility
of such a member. For the purpose of defining such standards and
the application thereof, such rules may—
" ( A ) appropriately classify prospective members (taking
into account relevant matters, including type or nature of
business done) and persons proposed to be associated with
members.
" ( B ) specify that all or any portion of such standard shall
be applicable to any such class.
" ( C ) require persons in any such class to pass examinations prescribed in accordance with such rules.
" ( D ) provide that persons in any such class other than
prospective members and partners, officers and supervisory
employees (which latter term may be defined by such rules
and as so defined shall include branch managers of members)
of members, may be qualified solely on the basis of compliance
with specified standards of training and such other qualifications as the association finds appropriate.
" ( E ) provide that applications to become a member or
a person associated with a member shall set forth such facts
as the association may prescribe as to the training, experience,
and other qualifications (including, in the case of an applicant for membership, financial responsibility) of the appli-
1407
1408
an^°rtco'rd^^""^'
PUBLIC LAW 93-463-OCT. 23, 1974
[88 STAT.
cant and that the association shall adopt procedures for
verification of qualifications of the applicant.
" ( F ) require any class of persons associated with a member to be registered with the association in accordance with
procedures specified by such rules (and any application or
document supplemental thereto required by such rules of a
person seeking to be registered with such association shall,
for the purposes of subsection (b) of section 6 of the Act, be
deemed an application required to be filed under this section).
"(5) the rules of the association assure a fair representation of
its members in the adoption of any rule of the association or
amendment thereto, the selection of its officers and directors, and
in all other phases of the administration of its affairs.
"(6) the rules of the association provide for the equitable allocation of dues among its members, to defray reasonable expenses
of administration.
"(7) the rules of the association are designed to prevent fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, in general, to protect the public
interest, and to remove impediments to and perfect the mechanism
of free and open futures trading.
"(8) the rules of the association provide that its members and
persons associated with its members shall be appropriately disciplined, by expulsion, suspension, fine, censure, or being suspended or barred from being associated with all members, or any
other fitting penalty, for any violation of its rules.
"(9) the rules of the association provide a fair and orderly
procedure with respect to the disciplining of members and persons associated with members and the denial of membership to
any person seeking membership therein or the barring of any
person from being associated with a member. In any proceeding
to determine whether any member or other person shall be disciplined, such rules shall require that specific charges be brought;
that such member or person shall be notified of, and be given an
opportunity to defend against, such charges; that a record shall
be kept; and that the determination shall include—
" (A) a statement setting forth any act or practice in which
such member or other person may be found to have engaged,
or which such member or other person may be found to have
omitted.
" ( B ) a statement setting forth the specific rule or rules of
the association of which any such act or practice, or omission
to act, is deemed to be in violation.
" ( C ) a statement whether the acts or practices prohibited
by such rule or rules, or the omisssion of any act required
thereby, are deemed to constitute conduct inconsistent with
just and equitable principles of trade.
''(^) ^ Statement setting forth the penalty imposed.
In any proceeding to determine whether a person shall be denied
membership or whether any person shall be barred from being
associated with a member, such rules shall provide that the person
shall be notified of, and be given an opportunity to be heard upon,
the specific grounds for denial or bar which are under consideration ; that a record shall be kept; and that the determination shall
set forth the specific grounds upon which the denial or bar is
based.
"(10) the rules of the association provide for a fair and
equitable procedure through arbitration or otherwise for the settlement of a customer's claims and grievances against any member
88 STAT. ]
PUBLIC LAW 93-463-OCT. 23, 1974
1409
or employee thereof: Provided, That (i) the use of such procedure
by a customer shall be voluntary, (ii) the procedure shall not be
applicable to any claim in excess of $5,000, (iii) the procedure
shall not result in any compulsory payment except as agreed upon
between the parties, and (iv) the term 'customer' as used in this
subsection shall not include a futures commission merchant or a
floor broker.
Notice and
"(c) The Commission may, after notice and opportunity for hear- hearing.
ing, suspend the registration of any futures association if it finds that
the rules thereof do not conform to the rec[uirements of the Commission, and any such suspension shall remain in effect until the Commission issues an order determining that such rules have been modified
to conform with such requirements.
" ( d ) I n addition to the fees and charges authorized by section 8a
(4) of this Act, each person registered under this Act, who is not a 7 use 12a.
member of a futures association registered pursuant to this section,
shall pay to the Commission such reasonable fees and charges as may
be necessary to defray the costs of additional regulatory duties
required to be performed by the Commission because such person is not
a member of a registered futures association. The Commission shall
establish such additional fees and charges by rules and regulations.
"(e) Any person registered under this Act, who is not a member of
a futures association registered pursuant to this section, in addition
to the other requirements and obligations of this Act and the regulations thereunder shall be subject to such other rules and regulations as
the Commission may find necessary to protect the public interest and
promote just and equitable principles of trade.
" ( f ) Upon filing of an application for registration pursuant to subsection ( a ) , the Commission may by order grant such registration if
the requirements of this section are satisfied. If, after appropriate
notice and opportunity for hearing, it appears to the Commission that
any requirement of this section is not satisfied, the Commission shall
by order deny such registration.
" ( g ) 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 ) If any registered futures association takes any disciplinary
action against any member thereof or any person associated with such
a member or denies admission 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 aggrieved thereby filed
within thirty days after such action has been taken or within such
longer period as the Commission may determine. Application to the
Commission 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 pursuant to subsection (k) of this section
unless the Commission otherwise orders, after notice and opportunity Notice and
for hearing on the question of a stay (which hearing may consist solely ^^""^•
of affidavits and oral arguments).
"(i) (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 Notice and
and opportunity for hearing, upon consideration of the record before ^^^""^•
the association and such other evidence as it may deem relevant—
1410
he^r/ng^ ^"^
Notice and
hearing.
PUBLIC LAW 93-463-OCT. 23, 1974
[88 STAT.
" ( 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 determination 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
inconsistent 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 required 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 imposed upon a member or person
associated with a member 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 membership in a
registered futures association or the barring of any person from being
associated with a member, 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 dismiss
the proceeding; otherwise, the Commission shall by order set aside the
action of the association and require it to admit the applicant to
membership therein, or to permit such person to be associated with
a member.
"(j) Every registered futures association shall file with the Commission in accordance with such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest,
copies of any changes in or additions to the rules of the association,
and such other information and documents as the Commission may
require to keep current or to supplement the registration statement
and documents filed pursuant to subsection (a) of this section. 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 Commission,
or upon such earlier date as the Commission may determine, unless the
Commission shall enter an order disapproving such change or addition ; and the Commission shall enter such an order unless such change
or addition appears to the Commission to be consistent with the
requirements of this section and the provisions of this Act.
" ( k ) (1) The Commission is authorized by order to abrogate any
rule of a registered futures association, if after appropriate notice and
opportunity for hearing, it appears to the Commission that such abrogation is necessary or appropriate to assure fair dealing by the members of such association, to assure a fair representation of its members
in the administration of its affairs or effectuate the purposes of this
title.
88 STAT. ]
PUBLIC LAW 93-463-OCT. 23, 1974
1411
" (2) The Commission may in writing request any registered futures
association to adopt any specified alteration or supplement to its rules
with respect to any of the matters hereinafter enumerated. If such
association fails to adopt such alteration or supplement within a
reasonable time, the Commission is authorized by order to alter or
supplement the rules of such association in the manner theretofore
req^uested, or with such modifications of such alteration or supplement
as it deems necessary if, after appropriate notice and opportunity for ^j^°'j" ^"'^
hearing, it appears to the Commission that such alteration or supple- hearing.
ment is necessary or appropriate in the public interest or to effectuate
the purposes of this section, with respect to—
" (A) the basis for, and procedure in connection with, the denial
of membership or the barring from being associated with a member or the disciplining of members or persons associated with
members, or the qualifications required for members or natural
persons associated with members or any class thereof;
" ( B ) the method for adoption of any change in or addition to
the rules of the association;
" ( C ) the method of choosing officers and directors.
" (1) 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—
Notice and
"(1) after appropriate notice and opportunity for hearing, by hearing.
order to suspend for a period not exceeding twelve months or to
revoke the registration of a registered futures association, if the
Commission finds that such association has violated any provisions
of this title or any rule or regulation thereunder, or has failed to
enforce compliance with its own rules, or has engaged in any other
activity tending to defeat the purposes of this Act;
Notice and
"(2) after appropriate notice and opportunity for hearing, by hearing.
order to suspend for a period not exceeding twelve months or to
expel from a registered futures association any member thereof,
or to suspend for a period not exceeding twelve months or to bar
any person from being associated with a member thereof, if the
Commission finds that such member or person—
" (A) has violated any provision of this title or any rule or
regulation thereunder, or has effected any transaction for any
other person who, he had reason to believe, was violating with
respect to such transaction any provision of this title or any
rule or regulation thereunder; or
" ( B ) has willfully violated any provision of the Commodity Exchange Act, as amended, or of any rule, regulation, or 7 use i.
order thereunder, or has effected any transaction for any
other person who, he had reason to believe, was willfully violating with respect to such transaction any provision of such
Act or rule, regulation, or order.
Notice and
"(3) after appropriate notice and opportunity for hearing, by hearing.
order to remove from office any officer or director of a registered
futures association who, the Commission finds, has willfully failed
to enforce the rules of the association, or has willfully abused his
authority.
Reports to
" (m) The Commission shall include in its annual reports to Congress C o n g r e s s .
information concerning any futures associations registered pursuant
to this section and the effectiveness of such associations in regulating
the practices of the members,"
1412
PUBLIC LAW 93-463-OCT. 23, 1974
[88 STAT.
TITLE IV—MISCELLANEOUS PROVISIONS
or^empToyeeT"
^EC. 401. Sectloii 9 of the Commodity Exchange Act, as amended
prohibition on
(7 U.S.C. 13), Is amended by adding the following new subsections:
usTo^f^'i'nfoma" ( ^ ) ^^ ^^^^^ ^^ ^ fclony punishable by a fine of not more than
tion.
$10,000 or imprisonment for not more than five years, or both, together
with the costs of prosecution, for any Commissioner of the Commission or any employee or agent thereof, to participate, directly or indirectly, in any transaction in commodity futures or any transaction
of the character of or which is commonly known to the trade as an
'option', 'privilege', 'indemnity', 'bid', 'offer', 'put', 'call', 'advance
guaranty', or 'decline guaranty', or for any such person to participate,
directly or indirectly, in any investment transaction in an actual commodity: Provided^ That such prohibition against any investment
transaction in an actual commodity shall not apply to a transaction
in which such person buys an agricultural commodity or livestock for
use in his own farming or ranching operations or sells an agricultural
commodity which he has produced in connection with his own farming
or ranching operations nor to any transaction in which he sells livestock which he has owned at least three months. With respect to such
excepted transactions, the Commission shall require any Commissioner
of the Commission or any employee or agent thereof who participates
in any such transaction to notify the Commission thereof in accordance
with such regulations as the Commission shall prescribe and the Commission shall make such information available to the public.
"(e) I t shall be a felony punishable by a fine of not more than
$10,000 or imprisonment for not more than five years, or both, together
with the costs of prosecution—(1) for any Commissioner of the Commission or any employee or agent thereof who, by virtue of his employment or position, acquires information which may affect or tend to
affect the price of any commodity futures or commodity and which
information has not been made public to impart such information
with intent to assist another person, directly or indirectly, to participate in any transaction in commodity futures, any transaction in an
actual commodity, or in any transaction of the character of or which
is commonly known to the trade as an 'option', 'privilege', 'indemnity',
'bid', 'offer', 'put', 'call', 'advance guaranty', or 'decline guaranty'; and
(2) for any person to acquire such information from any Commissioner
of the Commission or any employee or agent thereof and to use such
information in any transaction in commodity futures, any transaction
in an actual commodity, or in any transaction of the character of or
which is commonly known to the trade as an 'option', 'privilege',
'indemnity', 'bid', 'offer', 'put', 'call', 'advance guaranty', or 'decline
guaranty'."
SEC. 402. Section 4c of the Commodity Exchange Act, as amended
(7 U.S.C. 6c), is amended—
(a) By inserting " ( a ) "after "SEC. 4c.".
(b) By striking paragraph (B) in its entirety and inserting in lieu
thereof the following:
^ ^^^ ^
" ( B ) if such transaction involves any commodity specifically
set forth in section 2(a) of this Act, prior to the enactment of the
Commodity Futures Trading Commission Act of 1974, and if
such transaction is of the character of, or is commonly known to
the trade as, an 'option', 'privilege', 'indemnity', 'bid', 'offer', 'put',
'call', 'advance guaranty', or 'decline guaranty', or".
(c) By adding at the end thereof the following new subsection:
" ( b ) No person shall offer to enter into, enter into, or confirm the
execution of, any transaction subject to the provisions of subsection
(a) of this section involving any commodity regulated under this Act,
88
STAT.]
1413
PUBLIC LAW 93-463-OCT. 23, 1974
but not specifically set forth in section 2(a) of this Act, prior to the
enactment of the Commodity Futures Trading Commission Act of
1974, which is of the character of, or is commonly known to the trade
as, an 'option', 'privilege', 'indemnity', 'bid', 'offer', 'put', 'call', 'advance
guaranty', or 'decline guaranty', contrary to any rule, regulation,
or order of the Commission prohibiting any such transaction or allowing any such transaction under such terms and conditions as the Commission shall prescribe within one year after the effective date of the
Commodity Futures Trading Commission Act of 1974 unless the Commission determines and notifies the Senate Committee on Agriculture
and Forestry and the House Committee on Agriculture that it is
unable to prescribe such terms and conditions within such period of
time: Provided^ That any such order, rule, or regulation may be made
only after notice and opportunity for hearing: And provided further^
That the Commission may set different terms and conditions for
different markets."
(d) By striking the last sentence of subsection (a) as designated by
this section.
SEC. 403. Section 4 a ( l ) of the Commodity Exchange Act, as
amended (7 U.S.C. 6a), is amended by inserting, following the word
"straddles" in the last sentence of such paragraph the words "or
'arbitrage'" and by adding the following new sentences at the end
of such paragraph: "The word 'arbitrage' in domestic markets shall
be defined to mean the same as a 'spread' or 'straddle'. The Commission is authorized to define the term 'international arbitrage'."
SEC. 404. Section 4a (3) of the Commodity Exchange Act, as
amended (7 U.S.C. 6a), is amended by deleting the period at the end
of the first sentence and adding "as such terms shall be defined by
the Commission within ninety days after the effective date of the
Commodity Futures Trading Commission Act of 1974 by order consistent with the purposes of this Act."; and by deleting, effective
immediately on enactment of this Act, the remainder of paragraph
(3) : Provided^ That notwithstanding any other provision of law, the
Secretary of Agriculture, immediately upon the enactment of the
Commodity Futures Trading Commission Act of 1974, is authorized
and directed to promulgate regulations defining bona fide hedging
transactions and positions: And provided further^ That until the Secretary issues such regulations defining bona fide hedging transactions
and positions and such regulations are in full force and effect, such
terms shall continue to be defined as set forth in the Commodity
Exchange Act prior to its amendment by the Commodity Futures
Trading Commission Act of 1974.
SEC. 405. Section 4b of the Commodity Exchange Act, as amended
(7 U.S.C. 6b), is amended—
(a) By deleting the word 'cotton" where it appears in the last full
paragraph of such section, and inserting in lieu thereof the words
"a commodity".
(b) By striking the period at the end of such section and adding
the following: " : And provided further^ That such transactions shall
be made in accordance with such rules and regulations as the Commission may promulgate regarding the manner of the execution of
such transactions."
SEC. 406. Section 5a(6) of the Commodity Exchange Act, as
amended (7 U.S.C. 7a), is amended by deleting the semicolon at the
end of said subsection and inserting in lieu thereof the following:
"and adopted by the Commission;".
SEC. 407. Section 5a(8) of the Commodity Exchange Act, as
amended (7 U.S.C. 7a), is amended—
38-194 O - 76 - 7 pt. 2
7 u s e 2.
Notification of
congressional
committees.
'Arbitrage.
Hedging transactions.
Regulations.
7 u s e 1.
Simultaneous
buying and selling
orders.
eonformity to
U.S. s t a n d a r d s .
1414
Administrative
Law J u d g e .
Violations.
Ante, pp. 13971399.
Position classification.
Transfer of operations and proceedings.
7 u s e 4a note.
7 u s e 4a note.
Separability.
7 u s e 4a note.
Market reports.
7 u s e 20.
PUBLIC LAW 93-463-OCT. 23, 1974
[88 STAT.
(a) By deleting the words "not been disapproved by the Secretary
of Agriculture pursuant to paragraph (7) of section 8a" and inserting
in lieu thereof the words "been approved by the Commission pursuant
to paragraph (12) of section 5a".
(b) By deleting the word "so", and inserting the words "by the
Commission" immediately before the semicolon at the end of such
subsection.
SEC. 408. Section 6(b) of the Commodity Exchange Act, as amended
(7 U.S.C. 9), is amended—
(a) By striking in the second sentence "a referee" and inserting
in lieu thereof "an Administrative Law Judge".
(b) By striking the word "referee" each other place it appears
and inserting in lieu thereof "Administrative Law Judge".
SEC. 409. Section 9(c) of the Commodity Exchange Act, as amended
(7 U.S.C. 13), is amended by inserting after "section 4i" the following:
"section 4k, section 4m, section 4o,".
SEC. 410. Section 5108(c) of title 5 of the United States Code is
amended by adding after paragraph (11) thereof the following new
paragraph:
"(12) The Commodity Futures Trading Commission, subject to the
standards and procedures prescribed by this chapter, may place an
additional twenty positions in (iS-16, GS-17, and GS-18 for purposes
of carrying out its functions."
SEC. 411. All operations of the Commodity Exchange Commission
and of the Secretary of Agriculture under the Commodity Exchange
Act, including all pending administrative proceedings, shall be transferred to the Commodity Futures Trading Commission as of the
effective date of this Act and continue to completion. All rules, regulations, and orders heretofore issued by the Commodity Exchange Commission and by the Secretary of Agriculture under the Commodity
Exchange Act to the extent not inconsistent with the provisions of this
Act shall continue in full force and effect unless and until terminated,
modified, or suspended by the Commodity Futures Trading
Commission.
SEC. 412. Pending proceedings under existing law shall not be
abated by reason of any provision of this Act but shall be disposed of
pursuant to the applicable provisions of the Commodity Exchange
Act, as amended, in effect prior to the effective date of this Act.
SEC. 418. If any provision of this Act or the application thereof to
any person or circumstances is held invalid, the validity of the remainder of the Act and the application of such provision to other persons
or circumstances shall not be affected thereby.
SEC. 414. The Commodity Exchange Act, as amended, is amended
by adding the following new section at the end thereof:
"SEC. 16. (a) The Commission may conduct regular investigations
of the markets for goods, articles, services, rights, and interests which
are the subject of futures contracts, and furnish reports of the findings
of these investigations to the public on a regular basis. These market
reports shall, where appropriate, include information on the supply,
demand, prices, and other conditions in the United States and other
countries with respect to such goods, articles, services, rights, interests,
and information respecting the futures markets.
"(b) The Commission shall cooperate with the Department of Agriculture and any other Department or Federal agency which makes
market investigations to avoid unnecessary duplication of information-gathering activities.
"(c) The Department of Agriculture and any other Department or
Federal agency which has market information sought by the Commis-
!
88 STAT. ]
PUBLIC LAW 93-463-OCT. 23, 1974
sion shall furnish it to the Commission upon the request of any authorized employee of the Commission. The Commission shall abide by any
rules of confidentiality applying to such information.
" ( d ) The Commission shall not disclose in such reports data and
information which would separately disclose the business transactions
of any person and trade secrets or names of customers except as provided in section 8 of this Act."
SEC. 415. Section 4g of the Commodity Exchange Act, as amended,
is amended by inserting " ( 1 ) " after the section designation and by
adding the following new subsections:
"(2) Every clearinghouse and contract market shall maintain daily
trading records. The daily trading records shall include such information as the Commission shall prescribe by rule.
"(3) Brokers and futures commission merchants shall maintain
daily trading records for each customer in such manner and form as
to be identifiable with the trades referred to in subsection (2).
"(4) Daily trading records shall be maintained in a form suitable
to the Commission for such period as may be required by the Commission. Reports shall be made from the records maintained at such
times and at such places and in such form as the Commission may
prescribe by rule, order, or regulation in order to protect the public
interest and the interest of persons trading in commodity futures.
"(5) Before the beginning of trading each day, the exchange shall,
insofar as is practicable and under terms and conditions specified by
the Commission, make public the volume of trading on each type of
contract for the previous day and such other information as the Commission deems necessary in the public interest and prescribes Dy rule,
order, or regulation.
"(6) Nothing contained in this section shall be construed to prohibit
the Commission from making separate determinations for different
clearinghouses, contract markets, and exchanges when such determinations are warranted in the judgment of the Commission."
SEC. 416. The Commodity Exchange Act, as amended, is amended
by adding at the end thereof the following new section:
"SEC. 18. (a) The Commission shall establish and maintain, as part
of its ongoing operations, research and information programs to (1)
determine the feasibility of trading by computer, and the expanded
use of modern information system technology, electronic data processing, and modern communication systems by commodity exchanges,
boards of trade, and by the Commission itself for purposes of improving, strengthening, facilitating, or regulating futures trading
operations; (2) assist in the development of educational and other
informational materials regarding futures trading for dissemination
and use among producers, market users, and the general public; and
(3) carry out the general purposes of this Act.
" (b) The Commission shall include in its annual reports to Congress
plans and findings with respect to implementing this section."
SEC. 417. The Commodity Futures Trading Commission shall submit to the Congress, not later than June 30,1976, a report respecting the
need for legislation insuring owners of commodity futures accounts
and persons handling or clearing trades in such accounts against loss
by reason of the insolvency or financial failure of a futures commission merchant carrying such accounts. The report shall contain the
recommendations of the Commission concerning the form and nature
of any such legislation.
SEC. 418. (a) Except as otherwise provided specifically in this Act,
the effective date of this Act shall be the 180th day after enactment.
The Commission referred to in section 101 is hereby established effective immediately on enactment of this Act. Sections 102 and 410 shall
1415
7 use 12, 12-1.
oaiiy trading
'^^7°usc eg.
. Research and
g"am™^ ^°" ^'^°'
7 use 22.
Reports to eongress.
insurance legis^^7'^se 4a note.
Effective date,
^ ^^^ ^ "°*^-
1416
PUBLIC LAW 93-464-OCT. 24, 1974
[88 STAT.
bo effective immediately on enactment of this Act. Activities necessary
to implement the changes effected by this Act may be carried out after
the date of enactment and before as well as after the 180th day thereafter. Activities to be carried out after the date of enactment and before
the 180th day thereafter may include, but are not limited to the following : designation of boards of trade as contract markets, registration
of futures commission merchants, floor brokers, and other persons
required to be registered under the Act, approval or modification of
bylaws, rules, regulations, and resolutions of contract markets, and
issuance of regulations, effective on or after the 180th day after
enactment; appointment and compensation of the members of the Commission ; hiring and compensation of staff; and conducting of investigations and hearings. Nothing in this Act shall limit the authority of
the Secretary of Agriculture or the Commodity Exchange Commission
under the Commodity Exchange Act, as amended, prior to the 180th
day after enactment of this Act.
(b) Funds appropriated for the administration of the Commodity
Exchange Act, as amended, may be used to implement this Act
immediately after the date of enactment of this Act.
Approved October 23, 1974.
Public Law 93-464
October 24, 1974
[H. R . 1 6 8 5 7 ]
Tobacco.
Acreage allotments or q u o t a s ,
N . C . , l e a s e and
transfer.
7 u s e 1314b.
AN ACT
To provide for emergency allotment lease and transfer of tobacco allotments
or quotas for 1974 in certain disaster areas in North Carolina.
Be it enacted hy the Senate and House of Representatives of the
United States of America in Congress assembled^ That section 316
of the Agricultural Adjustment Act of 1938, as amended, is amended
by adding at the end thereof the following new subsection ( h ) :
" ( h ) Notwithstanding any provision of this section, when as a result
of drought, flood, damage due to excessive rain, hail, wind, tornado,
or other natural disaster, the Secretary determines (1) that one of the
counties hereinafter listed has suffered a loss of 10 per centum or more
in the number of acres of tobacco planted, and (2) that a lease of such
tobacco allotment or quota will not impair the effective operation of
the tobacco marketing quota or price support program, he may permit
the owner and operator of any farm within Craven, Carteret and
Jones Counties, North Carolina, which has suffered a loss of 10 per
centum or more in the number of acres of tobacco planted of such
crop to lease all or any part of such allotment or quota to any other
owners or operators in the same county, or nearby counties within
the same State, for use in such counties for the year 1974 on a farm
or farms having a current tobacco allotment or quota of the same
kind. In the case of a lease and transfer to an owner or operator in
another county pursuant to this subsection, the lease and transfer shall
not be effective until a copy of the lease is filed with and determined
by the county committee of the county to which the transfer is made
to be in compliance with the provisions of this subsection.".
Approved October 24, 1974.
@FedFRASER