§ 21. Registered futures associations

Footnotes

1. 1 So in original. The semicolon probably should be a period.
2. 2 So in original. The word “and” probably should not appear.
3. 3 So in original. The period probably should be a semicolon.
4. 4 So in original. No subpar. (B) has been enacted.
5. 5 So in original. The period probably should be “; and”.
6. 6 So in original. Probably should not be capitalized.
7. 7 Two subsecs. (q) have been enacted.

Legislative history

Reconstructed from this section’s Code source credit and amendment notes, resolved against the local Statutes at Large. Editorial notes are evidence, not the law that made the change.

1. 1922

   Commodity Futures Trading Commission Act of 1974

   Pub. L. 93–463 title III § 301 · 88 Stat. 1389

   Enacted · 7 U.S.C. § 21

   Sept. 21, 1922, ch. 369, § 17, as added Pub. L. 93–463, title III, § 301, Oct. 23, 1974, 88 Stat. 1406

   Source evidence

   Code source credit
   Sept. 21, 1922, ch. 369, § 17, as added Pub. L. 93–463, title III, § 301, Oct. 23, 1974, 88 Stat. 1406

   Enacted provision · exact public law section
   Sec. 301. The Commodity Exchange Act, as amended, is amended by adding the following new section: “Sec. 17. (a) Any 7 USC 21. 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 referred 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 (3) 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 Ante, p. 1397. 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 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), or (C) of this paragraph. “(4) the rules of the association provide that, except with the approval or at the direction of the Commission in cases in which the 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-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. “(D) a Statement Notice, hearing, and record. 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 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. “(c) The Commission may, after notice and opportunity for hearing, Notice and hearing. suspend the registration of any futures association if it finds that the rules thereof do not conform to the requirements of the Commission, and any such suspension shall remain in effect until the Commission issues an order determining that such rules have been modified to conform with such requirements. “(d) In 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 USC 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 hearing. 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 hearing. and opportunity for hearing, upon consideration of the record before the association and such other evidence as it may deem relevant— “(A) finds that such member or person has engaged in such acts or practices, or has omitted such act, as the association has found him to have engaged in or omitted, and “(B) determines that such acts or practices, or omission to act, are in violation of such rules of the association as have been designated in the 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, Notice and hearing. 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 Notice and hearing. 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. “(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 requested, or with such modifications of such alteration or supplement as it deems necessary if, after appropriate notice and opportunity for Notice and hearing. hearing, it appears to the Commission that such alteration or supplement is necessary or appropriate in the public interest or to effectuate the purposes of this section, with respect to— “(A) the basis for, and procedure in 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. “(l) The Commission is authorized, if such action appears to it to be necessary or appropriate in the public interest or to carry out the purposes of this section— “(1) after appropriate notice and opportunity for hearing, by Notice and 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; “(2) after appropriate notice and opportunity for hearing, by Notice and 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 USC 1. 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. “(3) after appropriate notice and opportunity for hearing, by Notice and 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. “(m) The Commission shall include in its annual reports to Congress Reports to Congress. information concerning any futures associations registered pursuant to this section and the effectiveness of such associations in regulating the practices of the members.”

2. 1978

   Futures Trading Act of 1978

   Pub. L. 95–405 § 22(1) · 92 Stat. 865

   Struck · 7 U.S.C. § 21(b)(3)(B)

   Pub. L. 95–405, § 22(1), struck out “(7 U.S.C. 9)” after “sections 9 and 15 of this title”

   Source evidence

   Code amendment note
   Subsec. (b)(3)(B). Pub. L. 95–405, § 22(1), struck out “(7 U.S.C. 9)” after “sections 9 and 15 of this title”.

   Enacted provision · exact public law section
   (1) striking out in subsection (b)(3)(B) “(7 U.S.C. 9)”;

3. 1978

   Futures Trading Act of 1978

   Pub. L. 95–405 § 22(2) · 92 Stat. 865

   Substituted · 7 U.S.C. § 21(b)(10)

   Pub. L. 95–405, § 22(2), substituted “$15,000” for “$5,000”

   Source evidence

   Code amendment note
   Subsec. (b)(10). Pub. L. 95–405, § 22(2), substituted “$15,000” for “$5,000”.

   Enacted provision · exact public law section
   (2) striking out in subsection (b)(10) “$5,000” and inserting in lieu thereof “$15,000”;

4. 1978

   Futures Trading Act of 1978

   Pub. L. 95–405 § 22(3) · 92 Stat. 865

   Substituted · 7 U.S.C. § 21(l)(1); 7 U.S.C. § 21(2)(A)

   Pub. L. 95–405, § 22(3), substituted “chapter” for “section” wherever appearing

   Source evidence

   Code amendment note
   Subsec. (l)(1), (2)(A). Pub. L. 95–405, § 22(3), substituted “chapter” for “section” wherever appearing.

   Enacted provision · exact public law section
   (3) striking out in subsection (1) “title” each time that word appears and inserting in lieu thereof “Act”; and

5. 1978

   Futures Trading Act of 1978

   Pub. L. 95–405 § 22(4) · 92 Stat. 865

   1. Added · 7 U.S.C. § 21(m); 7 U.S.C. § 21(n)

      Pub. L. 95–405, § 22(4), added subsec. (m)

   2. Redesignated · 7 U.S.C. § 21(m); 7 U.S.C. § 21(n)

      Pub. L. 95–405, § 22(4), redesignated former subsec. (m) as (n)

   Source evidence

   Code amendment note
   Subsecs. (m), (n). Pub. L. 95–405, § 22(4), added subsec. (m) and redesignated former subsec. (m) as (n).

   Enacted provision · exact public law section
   (4) redesignating subsection (m) as subsection (n), and inserting after subsection (1) a new subsection (m) as follows: “(m) Notwithstanding any other provision of law, the Commission may approve rules of futures associations that, directly or indirectly, require persons eligible for membership in such associations to become members of at least one such association, upon a determination by the Commission that such rules are necessary or appropriate to achieve the purposes and objectives of this Act.”.

6. 1983

   Futures Trading Act of 1982

   Pub. L. 97–444 § 233(1) · 96 Stat. 2294

   Inserted · 7 U.S.C. § 21(b)(4)(E)

   Pub. L. 97–444, § 233(1), inserted “, which may require the applicant to be fingerprinted and to submit, or cause to be submitted, such fingerprints to the Attorney General for identification and appropriate processing. Notwithstanding any other provision of law, such an association may receive from the Attorney General all the results of such identification and processing” after “adopt procedures for verification of qualifications of the applicant”

   Source evidence

   Code amendment note
   Subsec. (b)(4)(E). Pub. L. 97–444, § 233(1), inserted “, which may require the applicant to be fingerprinted and to submit, or cause to be submitted, such fingerprints to the Attorney General for identification and appropriate processing. Notwithstanding any other provision of law, such an association may receive from the Attorney General all the results of such identification and processing” after “adopt procedures for verification of qualifications of the applicant”.

   Enacted provision · exact public law section
   (1) amending subsection (b)(4)(E) by inserting before the period at the end thereof the following: “, which may require the applicant to be fingerprinted and to submit, or cause to be submitted, such fingerprints to the Attorney General for identification and appropriate processing. Notwithstanding any other provision of law, such an association may receive from the Attorney General all the results of such identification and processing”;

7. 1983

   Futures Trading Act of 1982

   Pub. L. 97–444 § 217(b) · 96 Stat. 2294

   1. Redesignated · 7 U.S.C. § 21(b)(10)

      Pub. L. 97–444, § 217(b), required association rules to provide for “expeditious” procedure, redesignated cl. (iv) as (ii)

   2. Substituted · 7 U.S.C. § 21(b)(10)

      Pub. L. 97–444, § 217(b), required association rules to provide for “expeditious” procedure, substituted “ ‘customer’ as used in this paragraph shall not include another member of the association” for “ ‘customer’ as used in this subsection shall not include a futures commission merchant or a floor broker”

   3. Struck · 7 U.S.C. § 21(b)(10)

      Pub. L. 97–444, § 217(b), required association rules to provide for “expeditious” procedure, struck out clauses “(ii) the procedure shall not be applicable to any claim in excess of $15,000, (iii) the procedure shall not result in any compulsory payment except as agreed upon between the parties,”

   Source evidence

   Code amendment note
   Subsec. (b)(10). Pub. L. 97–444, § 217(b), required association rules to provide for “expeditious” procedure, redesignated cl. (iv) as (ii) and substituted “ ‘customer’ as used in this paragraph shall not include another member of the association” for “ ‘customer’ as used in this subsection shall not include a futures commission merchant or a floor broker”, and struck out clauses “(ii) the procedure shall not be applicable to any claim in excess of $15,000, (iii) the procedure shall not result in any compulsory payment except as agreed upon between the parties,”.

   Enacted provision · exact public law section
   (b) Section 17(b)(10) of the Commodity Exchange Act (7 U.S.C. 21(b)(10)) is amended to read as follows: “(10) the rules of the association provide a fair, equitable, and expeditious 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 and (ii) the term ‘customer’ as used in this paragraph shall not include another member of the association.”.

8. 1983

   Futures Trading Act of 1982

   Pub. L. 97–444 § 233(2) · 96 Stat. 2294

   Substituted · 7 U.S.C. § 21(d)

   Pub. L. 97–444, § 233(2), substituted “section 12a(1) of this title” for “section 12a(4) of this title”

   Source evidence

   Code amendment note
   Subsec. (d). Pub. L. 97–444, § 233(2), substituted “section 12a(1) of this title” for “section 12a(4) of this title”.

   Enacted provision · exact public law section
   (2) striking out “section 8a(4)” in subsection (d) and inserting in lieu thereof “section 8a(l)”;

9. 1983

   Futures Trading Act of 1982

   Pub. L. 97–444 § 233(3) · 96 Stat. 2294

   Substituted · 7 U.S.C. § 21(h)

   Pub. L. 97–444, § 233(3), substituted “subsection (i) of this section” for “subsection (k) of this section”

   Source evidence

   Code amendment note
   Subsec. (h). Pub. L. 97–444, § 233(3), substituted “subsection (i) of this section” for “subsection (k) of this section”.

   Enacted provision · exact public law section
   (3) striking out “subsection (k)” in subsection (h) and inserting in lieu thereof “subsection (i)”;

10. 1983

    Futures Trading Act of 1982

    Pub. L. 97–444 § 233(4) · 96 Stat. 2294

    Substituted · 7 U.S.C. § 21(j)

    Pub. L. 97–444, § 233(4), substituted “A registered futures association shall submit to the Commission any change in or addition to its rules and may make such rules effective ten days after receipt of such submission by the Commission unless, within the ten-day period, the registered futures association requests review and approval thereof by the Commission or the Commission notifies such registered futures association in writing of its determination to review such rules for approval. The Commission shall approve such rules within thirty days of their receipt if Commission approval is requested under this subsection or within thirty days after the Commission determines to review for approval any other rules unless the Commission notifies the registered futures association of its inability to complete such approval or review within such period of time. The Commission shall approve such rules if such rules are determined by the Commission to be consistent with the requirements of this section and not otherwise in violation of this chapter or the regulations issued pursuant to this chapter, and the Commission shall disapprove, after appropriate notice and opportunity for hearing, any such rule which the Commission determines at any time to be inconsistent with the requirements of this section or in violation of this chapter or the regulations issued pursuant to this chapter. If the Commission does not approve or institute disapproval proceedings with respect to any rule within one hundred and eighty days after receipt or within such longer period of time as the registered futures association may agree to, or if the Commission does not conclude a disapproval proceeding with respect to any rule within one year after receipt or within such longer period as the registered futures association may agree to, such rule may be made effective by the registered futures association until such time as the Commission disapproves such rule in accordance with this subsection” for “Any change in or addition to the rules of a registered futures association shall be submitted to the Commission for approval and shall take effect upon the thirtieth day after such approval by the 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 chapter”

    Source evidence

    Code amendment note
    Subsec. (j). Pub. L. 97–444, § 233(4), substituted “A registered futures association shall submit to the Commission any change in or addition to its rules and may make such rules effective ten days after receipt of such submission by the Commission unless, within the ten-day period, the registered futures association requests review and approval thereof by the Commission or the Commission notifies such registered futures association in writing of its determination to review such rules for approval. The Commission shall approve such rules within thirty days of their receipt if Commission approval is requested under this subsection or within thirty days after the Commission determines to review for approval any other rules unless the Commission notifies the registered futures association of its inability to complete such approval or review within such period of time. The Commission shall approve such rules if such rules are determined by the Commission to be consistent with the requirements of this section and not otherwise in violation of this chapter or the regulations issued pursuant to this chapter, and the Commission shall disapprove, after appropriate notice and opportunity for hearing, any such rule which the Commission determines at any time to be inconsistent with the requirements of this section or in violation of this chapter or the regulations issued pursuant to this chapter. If the Commission does not approve or institute disapproval proceedings with respect to any rule within one hundred and eighty days after receipt or within such longer period of time as the registered futures association may agree to, or if the Commission does not conclude a disapproval proceeding with respect to any rule within one year after receipt or within such longer period as the registered futures association may agree to, such rule may be made effective by the registered futures association until such time as the Commission disapproves such rule in accordance with this subsection” for “Any change in or addition to the rules of a registered futures association shall be submitted to the Commission for approval and shall take effect upon the thirtieth day after such approval by the 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 chapter”.

    Enacted provision · exact public law section
    (4) striking out the last sentence in subsection (j) and inserting in lieu thereof the following: “A registered futures association shall submit to the Commission any change in or addition to its rules and may make such rules effective ten days after receipt of such submission by the Commission unless, within the ten-day period, the registered futures association requests review and approval thereof by the Commission or the Commission notifies such registered futures association in writing of its determination to review such rules for approval. The Commission shall approve such rules within thirty days of their receipt if Commission approval is requested under this subsection or within thirty days after the Commission determines to review for approval any other rules unless the Commission notifies the registered futures association of its inability to complete such approved or review within such period of time. The Commission shall approve such rules if such rides are determined by the Commission to be consistent with the requirements of this section and not otherwise in violation of this Act or the regulations issued pursuant to this Act, and the Commission shall disapprove, after appropriate notice and opportunity for hearing, any such rule which the Commission determines at any time to be inconsistent with the requirements of this section or in violation of this Act or the regulations issued pursuant to this Act. If the Commission does not approve or institute disapproval proceedings with respect to any rule within one hundred and eighty days after receipt or within such longer period of time as the registered futures association may agree to, or if the Com-mission does not conclude a disapproval proceeding with respect to any rule within one year after receipt or within such longer period as the registered futures association may agree to, such rule may be made effective by the registered futures association until such time as the Commission disapproves such rule in accordance with this subsection.”;

11. 1983

    Futures Trading Act of 1982

    Pub. L. 97–444 § 233(5) · 96 Stat. 2294

    Added · 7 U.S.C. § 21(o)(q)

    Pub. L. 97–444, § 233(5), added subsecs. (o), (p), and (q)

    Source evidence

    Code amendment note
    Subsecs. (o) to (q). Pub. L. 97–444, § 233(5), added subsecs. (o), (p), and (q).

    Enacted provision · exact public law section
    (5) adding at the end thereof the following new subsections: “(o) (1) The Commission may require any futures association registered pursuant to this section to perform any portion of the registration functions under this Act with respect to each member of the association other than a contract market and with respect to each associated person of such member, in accordance with rules, notwithstanding any other provision of law, adopted by such futures association and submitted to the Commission pursuant to section 17(j) of this Act, and subject to the provisions of this Act applicable 7 USC 21. to registrations granted by the Commission. “(2) In performing any Commission registration function authorized by the Commission under section 8a(10), this section, or any 7 USC 12a. other applicable provisions of this Act, a futures association may issue orders (A) to refuse to register any person, (B) to register conditionally any person, (C) to suspend the registration of any person, (D) to place restrictions on the registration of any person, or (E) to revoke the registration of any person. If such an order is the final decision of the futures association, any person against whom the order has been issued may petition the Commission to review the decision. The Commission may on its own initiative or upon petition decline review or grant review and affirm, set aside, or modify such an order of the futures association; and the findings of the futures association as to the facts, if supported by the weight of the evidence, shall be conclusive. Unless the Commission grants review under this section of an order concerning registration issued by a futures association, the order of the futures association shall be considered to be an order issued by the Commission. “(3) Nothing in this section shall affect the Commission’s authority to review the granting of a registration application by a registered futures association that is performing any Commission registration function authorized by the Commission under section 8a(10), this section, or any other applicable provision of this Act. “(4) If a person against whom a futures association has issued a registration order under this subsection petitions the Commission to review that order and the Commission declines to take review, such person may file a petition for review with a United States court of appeals, in accordance with section 6(b) of this Act. 7 USC 9. “(p) Notwithstanding any other provision of this section, each futures association registered under this section on the date of enactment of the Futures Trading Act of 1982, shall adopt and submit for Commission approval not later than ninety days after such date of enactment, and each futures association that applies for registration after such date shall adopt and include with its application for registration, rules of the association that require the association to— “(1) establish training standards and proficiency testing for persons involved in the solicitation of transactions subject to the provisions of this Act, supervisors of such persons, and all persons for which it has registration responsibilities, and a program to audit and enforce compliance with such standards; “(2) establish minimum capital, segregation, and other financial requirements applicable to its members for which such requirements are imposed by the Commission and implement a program to audit and enforce compliance with such requirements, except that such requirements may not be less stringent than those imposed on such firms by this Act or by Commission regulation; and “(3) establish minimum standards governing the sales practices of its members and persons associated therewith for transactions subject to the provisions of this Act. “(q) Each futures association registered under this section shall develop a comprehensive program that fully implements the rules approved by the Commission under this section as soon as practicable but not later than September 30, 1985, in the case of any futures association registered on the date of enactment of the Futures Trading Act of 1982, and not later than two and one-half years after the date of registration in the case of any other futures association registered under this section.”.

12. 1986

    Futures Trading Act of 1986

    Pub. L. 99–641 § 110(6) · 100 Stat. 3556

    Substituted · 7 U.S.C. § 21(b)(2)

    Pub. L. 99–641, § 110(6), substituted “within” for “with in” before “the meaning”

    Source evidence

    Code amendment note
    Subsec. (b)(2). Pub. L. 99–641, § 110(6), substituted “within” for “with in” before “the meaning”.

    Enacted provision · exact public law section
    (6) in the second full sentence of section 17(b)(2) (7 U.S.C. 21(b)(2)), by striking out “with in” and inserting in lieu thereof “within”; and

13. 1986

    Futures Trading Act of 1986

    Pub. L. 99–641 § 107 · 100 Stat. 3556

    Amended · 7 U.S.C. § 21(h)

    Pub. L. 99–641, § 107, amended subsec. (h) generally. Prior to amendment, subsec. (h) read as follows: “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 (i) of this section unless the Commission otherwise orders, after notice and opportunity for hearing on the question of a stay (which hearing may consist solely of affidavits and oral arguments).”

    Source evidence

    Code amendment note
    Subsec. (h). Pub. L. 99–641, § 107, amended subsec. (h) generally. Prior to amendment, subsec. (h) read as follows: “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 (i) of this section unless the Commission otherwise orders, after notice and opportunity for hearing on the question of a stay (which hearing may consist solely of affidavits and oral arguments).”

    Enacted provision · exact public law section
    SEC. 107. REGISTERED FUTURES ASSOCIATION DISCIPLINARY ACTIONS AND MEMBERSHIP RESTRICTIONS. Subsections (h) and (i) of section 17 of the Commodity Exchange Act (7 U.S.C. 21 (h) and (i)) are amended to read as follows: “(h) (1) If any registered futures association takes any final disciplinary action against a member of the association or a person associated with a member, denies admission to any person seeking membership therein, or bars any person from being associated with a member, the association promptly shall give notice thereof to such member or person and file notice thereof with the Commission. The notice shall be in such form and contain such information as the Commission, by rule or regulation, may prescribe as necessary or appropriate to carry out the purposes of this Act. “(2) Any action with respect to which a registered futures association is required by paragraph (1) to file notice shall be subject to review by the Commission on its motion, or on application by any person aggrieved by the action. Such application shall be filed within 30 days after the date such notice is filed with the Commission and received by the aggrieved person, or within such longer period as the Commission may determine. “(3) (A) Application to the Commission for review, or the institution of review by the Commission on its own motion, shall not operate as a stay of such action unless the Commission otherwise orders, summarily or after notice and opportunity for hearing on the question of a stay (which hearing may consist solely of the submission of affidavits or presentation of oral arguments). “(B) The Commission shall establish procedures for expedited consideration and determination of the question of a stay. “(i) (1) In a proceeding to review a final disciplinary action taken by a registered futures association against a member thereof or a person associated with a member, after appropriate notice and opportunity for a hearing (which hearing may consist solely of consideration of the record before the association and opportunity for the presentation of supporting reasons to affirm, modify, or set aside the sanction imposed by the association)— “(A) if the Commission finds that— “(i) the member or person associated with a member has engaged in the acts or practices, or has omitted the acts, that the association has found the member or person to have engaged in or omitted; “(ii) the acts or practices, or omissions to act, are in violation of the rules of the association specified in the determination of the association; and “(iii) such rules are, and were applied in a manner, consistent with the purposes of this Act, the Commission, by order, shall so declare and, as appropriate, affirm the sanction imposed by the association, modify the sanction in accordance with paragraph (2), or remand the case to the association for further proceedings; or “(B) if the Commission does not make any such finding, the Commission, by order, shall set aside the sanction imposed by the association and, if appropriate, remand the case to the association for further proceedings. “(2) If, after a proceeding under paragraph (1), the Commission finds that any penalty imposed on a member or person associated with a member is excessive or oppressive, having due regard for the public interest, the Commission, by order, shall cancel, reduce, or require the remission of the penalty. “(3) In a proceeding to review the denial of membership in a registered futures association or the barring of any person from being associated with a member, after appropriate notice and opportunity for a hearing (which hearing may consist solely of consideration of the record before the association and opportunity for the presentation of supporting reasons to affirm, modify, or set aside the action of the association)— “(A) if the Commission finds that— “(i) the specific grounds on which the denial or bar is based exist in fact; “(ii) the denial or bar is in accordance with the rules of the association; and “(iii) such rules are, and were applied in a manner, consistent with the purposes of this Act, the Commission, by order, shall so declare and, as appropriate, affirm or modify the action of the association, or remand the case to the association for further proceedings; or “(B) if the Commission does not make any such finding, the Commission, by order, shall set aside the action of the association and require the association to admit the applicant to membership or permit the person to be associated with a member, or, as appropriate, remand the case to the association for further proceedings. “(4) Any person (other than a registered futures association) aggrieved by a final order of the Commission entered under this subsection may file a petition for review with a United States court of appeals in the same manner as provided in section 6(b).”. Ante, p. 3557.

14. 1986

    Futures Trading Act of 1986

    Pub. L. 99–641 § 107 · 100 Stat. 3556

    Amended · 7 U.S.C. § 21(i)

    Pub. L. 99–641, § 107, amended subsec. (i) generally. Prior to amendment, subsec. (i) read as follows:

    Source evidence

    Code amendment note
    Subsec. (i). Pub. L. 99–641, § 107, amended subsec. (i) generally. Prior to amendment, subsec. (i) read as follows:

    “(1) In a proceeding to review disciplinary action taken by a registered futures association against a member thereof or a person associated with a member, if the Commission, after appropriate notice and opportunity for hearing, upon consideration of the record before the association and such other evidence as it may deem relevant— “(A) finds that such member or person has engaged in such acts or practices, or has omitted such act, as the association has found him to have engaged in or omitted, and “(B) determines that such acts or practices, or omission to act, are in violation of such rules of the association as have been designated in the 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.”

    Enacted provision · exact public law section
    SEC. 107. REGISTERED FUTURES ASSOCIATION DISCIPLINARY ACTIONS AND MEMBERSHIP RESTRICTIONS. Subsections (h) and (i) of section 17 of the Commodity Exchange Act (7 U.S.C. 21 (h) and (i)) are amended to read as follows: “(h) (1) If any registered futures association takes any final disciplinary action against a member of the association or a person associated with a member, denies admission to any person seeking membership therein, or bars any person from being associated with a member, the association promptly shall give notice thereof to such member or person and file notice thereof with the Commission. The notice shall be in such form and contain such information as the Commission, by rule or regulation, may prescribe as necessary or appropriate to carry out the purposes of this Act. “(2) Any action with respect to which a registered futures association is required by paragraph (1) to file notice shall be subject to review by the Commission on its motion, or on application by any person aggrieved by the action. Such application shall be filed within 30 days after the date such notice is filed with the Commission and received by the aggrieved person, or within such longer period as the Commission may determine. “(3) (A) Application to the Commission for review, or the institution of review by the Commission on its own motion, shall not operate as a stay of such action unless the Commission otherwise orders, summarily or after notice and opportunity for hearing on the question of a stay (which hearing may consist solely of the submission of affidavits or presentation of oral arguments). “(B) The Commission shall establish procedures for expedited consideration and determination of the question of a stay. “(i) (1) In a proceeding to review a final disciplinary action taken by a registered futures association against a member thereof or a person associated with a member, after appropriate notice and opportunity for a hearing (which hearing may consist solely of consideration of the record before the association and opportunity for the presentation of supporting reasons to affirm, modify, or set aside the sanction imposed by the association)— “(A) if the Commission finds that— “(i) the member or person associated with a member has engaged in the acts or practices, or has omitted the acts, that the association has found the member or person to have engaged in or omitted; “(ii) the acts or practices, or omissions to act, are in violation of the rules of the association specified in the determination of the association; and “(iii) such rules are, and were applied in a manner, consistent with the purposes of this Act, the Commission, by order, shall so declare and, as appropriate, affirm the sanction imposed by the association, modify the sanction in accordance with paragraph (2), or remand the case to the association for further proceedings; or “(B) if the Commission does not make any such finding, the Commission, by order, shall set aside the sanction imposed by the association and, if appropriate, remand the case to the association for further proceedings. “(2) If, after a proceeding under paragraph (1), the Commission finds that any penalty imposed on a member or person associated with a member is excessive or oppressive, having due regard for the public interest, the Commission, by order, shall cancel, reduce, or require the remission of the penalty. “(3) In a proceeding to review the denial of membership in a registered futures association or the barring of any person from being associated with a member, after appropriate notice and opportunity for a hearing (which hearing may consist solely of consideration of the record before the association and opportunity for the presentation of supporting reasons to affirm, modify, or set aside the action of the association)— “(A) if the Commission finds that— “(i) the specific grounds on which the denial or bar is based exist in fact; “(ii) the denial or bar is in accordance with the rules of the association; and “(iii) such rules are, and were applied in a manner, consistent with the purposes of this Act, the Commission, by order, shall so declare and, as appropriate, affirm or modify the action of the association, or remand the case to the association for further proceedings; or “(B) if the Commission does not make any such finding, the Commission, by order, shall set aside the action of the association and require the association to admit the applicant to membership or permit the person to be associated with a member, or, as appropriate, remand the case to the association for further proceedings. “(4) Any person (other than a registered futures association) aggrieved by a final order of the Commission entered under this subsection may file a petition for review with a United States court of appeals in the same manner as provided in section 6(b).”. Ante, p. 3557.

15. 1986

    Futures Trading Act of 1986

    Pub. L. 99–641 § 108 · 100 Stat. 3556

    Struck · 7 U.S.C. § 21(j)

    Pub. L. 99–641, § 108, struck out sentence which read as follows: “The Commission shall approve such rules within thirty days of their receipt if Commission approval is requested under this subsection or within thirty days after the Commission determines to review for approval any other rules unless the Commission notifies the registered futures association of its inability to complete such approval or review within such period of time.”

    Source evidence

    Code amendment note
    Subsec. (j). Pub. L. 99–641, § 108, struck out sentence which read as follows: “The Commission shall approve such rules within thirty days of their receipt if Commission approval is requested under this subsection or within thirty days after the Commission determines to review for approval any other rules unless the Commission notifies the registered futures association of its inability to complete such approval or review within such period of time.”

    Enacted provision · exact public law section
    SEC. 108. RULE REVIEW PROCEDURES. Section 17(j) of the Commodity Exchange Act (7 U.S.C. 21(j)) is amended by striking out the third sentence.

16. 1986

    Futures Trading Act of 1986

    Pub. L. 99–641 § 110(7) · 100 Stat. 3556

    Substituted · 7 U.S.C. § 21(k)(1)

    Pub. L. 99–641, § 110(7), substituted “section” for “title”

    Source evidence

    Code amendment note
    Subsec. (k)(1). Pub. L. 99–641, § 110(7), substituted “section” for “title”.

    Enacted provision · exact public law section
    (7) in section 17(k)(1) (7 U.S.C. 21(k)(1)), by striking out “title” and inserting in lieu thereof “section”.

17. 1992

    Futures Trading Practices Act of 1992

    Pub. L. 102–546 § 402(12)(A) · 106 Stat. 3590

    Changed · 7 U.S.C. § 21(a)(1); 7 U.S.C. § 21(a)(2)

    Pub. L. 102–546, § 402(12)(A), realigned margins

    Source evidence

    Code amendment note
    Subsec. (a)(1), (2). Pub. L. 102–546, § 402(12)(A), realigned margins.

    Enacted provision · exact public law section
    (A) in subsection (a) by indenting the left margin of paragraphs (1) and (2) by 2 ems; and

18. 1992

    Futures Trading Practices Act of 1992

    Pub. L. 102–546 title II · 106 Stat. 3590

    1. Struck · 7 U.S.C. § 21(b)(3)

       Pub. L. 102–546, §§ 206(b)(1)(A), (B), 209(b)(8)(A)(i), struck out “or” at end of subpar. (A), in subpar. (B) made technical amendment to reference to sections 9 and 15 of this title to reflect change in reference to corresponding section of original act

    2. Substituted · 7 U.S.C. § 21(b)(3)

       Pub. L. 102–546, §§ 206(b)(1)(A), (B), 209(b)(8)(A)(i), struck out “or” at end, and in subpar. (D) substituted a semicolon for period at end

    Source evidence

    Code amendment note
    Subsec. (b)(3). Pub. L. 102–546, §§ 206(b)(1)(A), (B), 209(b)(8)(A)(i), struck out “or” at end of subpar. (A), in subpar. (B) made technical amendment to reference to sections 9 and 15 of this title to reflect change in reference to corresponding section of original act and struck out “or” at end, and in subpar. (D) substituted a semicolon for period at end.

    Enacted provision · exact public law
    TITLE II— ENHANCEMENT OF REGULATORY AND ENFORCEMENT ACTIVITIES SEC. 201. DUTIES OF CONTRACT MARKETS; AUDIT TRAILS. (a) In General.— Section 5a (7 U.S.C. 7a) is amended— (1) by inserting “(a)” after the section designation; and (2) by adding at the end the following new subsection: “(b) (1) Each contract market shall maintain and utilize a system to monitor trading to detect and deter violations of the contract market’s rules and regulations committed in the making of trades and the execution of customer orders on the floor or subject to the rules of such contract market. The system shall include— “(A) physical observation of trading areas; “(B) audit trail and recordkeeping systems able to capture essential data on the terms, participants, and sequence of transactions (including relevant data on unmatched trades and out-trades); “(C) systems capable of reviewing, and used to review, data on trades effectively on a regular basis to detect violations committed in making trades and executing customer orders on the floor or subject to the rules of such contract market, including— “(i) all types of violations attributable to dual trading; and “(ii) to the full extent feasible, as determined by the Commission, all other types of violations involving the making of trades and the execution of customer orders; “(D) the use of information gathered through such system on a consistent basis to bring appropriate disciplinary actions against violators; “(E) the commitment of resources to such system necessary for such system to be effective in detecting and deterring such violations, including adequate staff to develop and prosecute disciplinary actions; and “(F) the assessment of meaningful penalties against violators and the referral of appropriate cases to the Commission. “(2) The audit trail system of the contract market shall, consistent Records. with Commission regulations, accurately record— “(A) the times of trades in increments of no more than one minute in length; and “(B) the sequence of trades for each floor trader and broker. “(3) Beginning three years after the date of enactment of this Records. subsection, the audit trail system of each contract market, except as provided in paragraph (5) and except to the extent the Commission determines that circumstances beyond the control of the contract market prevent compliance despite the contract market’s affirmative good faith efforts to comply, shall— “(A) for all trades, record accurately and promptly the essential data on terms, participants, and times as required by the Commission by rule, including the time of execution of such trade, through a means that— “(i) records such data in a form which cannot be altered except in a manner that will leave a complete and independent record of such alteration; “(ii) continually provides such data to the contract market; “(iii) identifies such time, to the extent practicable as determined by the Commission— “(I) independently of the person making the trade; “(II) through a mechanism that records the time automatically when entered by the person making the trade; or “(III) through such other means that will capture a similarly reliable time; and “(iv) is adequately precise to determine, to the extent practicable as determined by the Commission by rule or order— “(I) the sequence of all trades by each floor trader; and “(II) the sequence of all trades by each floor broker; and “(B) to the extent practicable as determined by the Commission by rule or order, for customer trades, record the time that each order is received on the floor of the board of trade, is received by the floor broker for execution (or when such order is transmitted in an extremely rapid manner to the broker), and is reported from the floor of the board of trade as executed, through a means that— “(i) records such times in a form which cannot be altered except in a manner that will leave a complete and independent record of such alteration; “(ii) continually provides such data to the contract market; “(iii) identifies such time— “(I) independently of the person making the trade or processing the order; “(II) through a mechanism that records the time automatically when entered by the person making the trade or processing such order, as appropriate; or “(III) through such other means as will capture a similarly reliable time; and “(iv) is adequately precise to determine— “(I) the sequence in which, for each futures commission merchant, floor broker, or member firm, as applicable, all orders are received on and reported from the floor of the contract market; and “(II) the sequence in which orders are received by each floor broker for execution. “(4) The Commission may, by rule, establish standards under which the audit trail systems required under paragraph (3) shall record, to the extent practicable— “(A) the sequence of all trades made by all floor traders and floor brokers; and “(B) the interval between the time of receipt and the time of execution of each order by the floor broker executing the order. “(5) (A) The Commission shall, by rule or order, make exemptions from the requirements of paragraph (3)— “(i) for an exchange with respect to which the Commission finds that— “(I) the volume of trading on such exchange is relatively small and the exchange has demonstrated substantial compliance with the objectives of such paragraph; and “(II) the trade monitoring system at such exchange otherwise maintains a high level of compliance with this subsection; and “(ii) to the extent determined appropriate by the Commission, for categories of customer orders with respect to which the Commission finds that such orders are transmitted to and reported from the trading pit in an extremely rapid manner such that substantial compliance with the objectives of paragraph (3) can be otherwise achieved. “(B) For purposes of subparagraph (A)(i)(I) the Commission shall find that the volume of trading at an exchange is relatively small if, among other things, the Commission determines that the average daily trading volume for each contract market for which the board of trade is designated is less than the threshold trading level established for the contract market under section 4j(a)(4). “(6) Any rule or order adopted by the Commission under paragraphs Effective date. (4) and (5) shall become effective thirty legislative days or ninety calendar days, whichever is later, after submission of such rule or order to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate. For purposes of this paragraph, the term ‘legislative day’ means any day on which either House of Congress is in session.”. (b) Study.— (1) In general.— Not later than two years after the date 7 USC 7a note. Reports. of enactment of this Act, the Commodity Futures Trading Commission shall submit to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate a report that contains— (A) an assessment of the progress of each contract market in developing and implementing systems to record the times of transactions independently, precisely, and completely as required under section 5a(b) of the Commodity Exchange Act (as added by subsection (a) of this section); and (B) recommendations as to whether any extension of time for the completion of such systems or any modification of the standards contained in such section is appropriate. (2) GAO views.— The Comptroller General of the United States shall state to Congress the views of the Comptroller General with regard to the issues addressed in such report. (c) Audit Trail Compliance as Condition for Contract Market Designation.— Section 5 (7 U.S.C. 7) is amended by— (1) indenting the left margin of subdivisions (a) through (g) by 2 ems; (2) striking “(a)”, “(b)”, “(c)”, “(d)”, “(e)”, “(f)”, and “(g)”, and inserting “(1)”, “(2)”, “(3)”, ”(4)”, “(5)”, “(6)”, and “(7)”, respectively; and (3) adding at the end the following: “(8) When such board of trade demonstrates that every contract market for which such board of trade is designated complies with the requirements of section 5a(b).”. SEC. 202. COMMISSION OVERSIGHT; DEFICIENCY ORDERS. (a) In General.— The Act is amended by inserting after section 8d (7 U.S.C. 12d) the following new section: “SEC. 8e. COMMISSION OVERSIGHT; DEFICIENCY ORDERS. “(a) Assessments.— At least once every two years, to the extent practicable, the Commission shall assess whether the trade monitoring system of each contract market satisfies section 5a(b). “(b) Deficiency Orders.— “(1) Causes.— The Commission may issue a proposed deficiency order in accordance with paragraph (2), or take such other administrative or enforcement action as the Commission determines is appropriate, if, based on its assessment or on other information, the Commission at any time has reason to believe that a contract market’s trade monitoring system implemented pursuant to section 5a(b) does not satisfy one or more of the requirements of such section. “(2) Contents.— A proposed deficiency order issued under this subsection shall specify— “(A) the deficiencies the Commission has reason to believe exist in the trade monitoring system of the contract market and a statement of reasons supporting the Commission’s belief that those deficiencies exist; “(B) the corrective action that the Commission believes that the contract market must take and an acceptable timetable for such corrective action; and “(C) a date, not less than twenty days from the date of issuance of the proposed deficiency order, when such deficiency order will become final, subject to subsection (d). “(3) Remedies.— On becoming final, the Commission deficiency order may— “(A) require the contract market to— “(i) institute appropriate improvements in its trade monitoring system necessary to correct the deficiencies noted therein; “(ii) satisfy stated objective performance criteria to correct such deficiencies; “(iii) upgrade or reconfigure existing systems for collecting or processing relevant data on trading and trader or broker activity, including, where appropriate, the commitment of additional resources; or “(B) revoke any exemption of the contract market from the regulations prohibiting the privilege of dual trading under section 4j(a), if the deficiency noted in such deficiency order relates to— “(i) the audit trail system the contract market is required to maintain under paragraph (2), (3), or (4) of section 5a(b); or “(ii) the prevention, detection, or disciplining of violations attributable to such trading at such contract market, subject to the standards, exceptions, and duration provisions of section 4j(a); or “(C) take any combination of the actions described in subparagraphs (A) and (B). “(4) Removal.— If the Commission finds, after notice and opportunity for a hearing on the record prior to such deficiency order becoming final, that a named officer, director, committee member, or employee of such contract market has willfully— “(A) violated this Act, the rules or regulations of the Commission thereunder, or the rules of such contract market; “(B) abused the authority of such person; or “(C) without reasonable justification or excuse, failed to enforce compliance with any provision of the rules of such contract market by any member or person associated with a member thereof, the Commission may issue a deficiency order under this section to remove such officer, director, committee member, or employee. “(5) Designation as contract market.— Notwithstanding section 6, during the period that a proposed or final deficiency order under this section is in effect, the Commission may refrain from approving any application for designation as a contract market made by the board of trade whose contract market is the subject of such deficiency order. “(6) Delegation.— The Commission shall not delegate the authority to issue deficiency orders under this subsection. “(c) Rescission, Modification, or Delay of Deficiency Orders.— Before any proposed deficiency order issued by the Commission under subsection (b) may become final, the Commission shall— “(1) provide the affected contract market with an opportunity for a hearing through submission of written data, views, or arguments and, under terms set by the Commission at the request of the contract market, through an oral presentation of views and comments to the Commission, in order to petition the Commission to rescind, modify, or delay such deficiency order; and “(2) rule on such petition, not less than twenty days before the deficiency order takes effect, making findings, as appropriate, as to whether— “(A) the deficiencies cited by the Commission have been corrected or are being corrected under an expeditious timetable acceptable to the Commission; “(B) the trade monitoring system of the contract market is deficient as noted in the deficiency order; or “(C) the timetable for corrective action by the contract market in the proposed deficiency order, and the particular corrective action proposed, is appropriate in light of the deficiencies noted and the purposes of this Act. “(d) Penalties.— Violation of a final deficiency order issued under subsection (c) shall be considered a violation of an order of the Commission for purposes of— “(1) establishing liability and assessing penalties against a contract market or any director, officer, agent, or employee thereof under section 6b or 6c; or “(2) initiating proceedings under section 5b or 6(a). “(e) Judicial Review.— “(1) Persons.— Any person, other than a contract market, aggrieved by a deficiency order issued under subsection (b)(4), may obtain review of such deficiency order when issued by the Commission under the terms and conditions in section 6(b). “(2) Contract markets.— Any contract market that has petitioned the Commission to rescind, modify, or delay any proposed deficiency order issued under subsection (b) may obtain judicial review of any final such deficiency order only in the United States Court of Appeals for the circuit in which the party seeking review resides or has its principal place of business, or in the United States Court of Appeals for the District of Columbia Circuit, under the standards applicable to rulemaking proceedings under section 553 of title 5, United States Code.”. SEC. 203. ORAL ORDERS. (a) In General.— Section 4c (7 U.S.C. 6c) is amended by adding at the end the following new subsection: “(g) The Commission shall adopt rules requiring that a contemporaneous written record be made, as practicable, of all orders for execution on the floor or subject to the rules of each contract market placed by a member of the contract market who is present on the floor at the time such order is placed.”. (b) Effective Date.— The Commission shall adopt the rules required by the amendment made under subsection (a) within two hundred and seventy days after the date of enactment of this Act. SEC. 204. TELEMARKETING FRAUD. (a) In General.— Section 17(p) (7 U.S.C. 21(p)) is amended— (1) by striking “and” at the end of paragraph (2); (2) by striking the period at the end of paragraph (3) and inserting and”; and (3) by adding at the end the following new paragraph: “(4) establish special supervisory guidelines to protect the public interest relating to the solicitation by telephone of new futures or options accounts and make such guidelines applicable to those members determined to require such guidelines in accordance with standards established by the Commission consistent with this Act. Such guidelines may include a requirement that, with respect to a customer with no previous futures or commodity options trading experience, the member may not enter an order for the account of such customer for a period of three days following opening of the account and receipt of a signed acknowledgment by the customer of receipt of a risk disclosure statement.”. (b) Implementation.— The guidelines required under section 17(p)(4) of the Commodity Exchange Act (as added by subsection (a) of this section) shall be submitted by a futures association registered with the Commodity Futures Trading Commission on the date of enactment of this Act to the Commission for the approval of the Commission not later than one hundred and eighty days after the date of enactment of this Act. SEC. 205. UNDERCOVER OPERATIONS AND ENFORCEMENT. Section 8(a) of the Commodity Exchange Act (7 U.S.C. 12(a)) is amended by— (1) inserting “(1)” after “(a)”; and (2) adding at the end the following: “(2) In conducting investigations authorized under this subsection or any other provision of this Act, the Commission shall continue, as the Commission determines necessary, to request the assistance of and cooperate with the appropriate Federal agencies in the conduct of such investigations, including undercover operations by such agencies. The Commission and the Department of Justice shall assess the effectiveness of such undercover operations and, within two years of the date of enactment of the Futures Trading Practices Act of 1992, shall recommend to Congress any additional undercover or other authority for the Commission that the Commission or the Department of Justice believes to be necessary.”. SEC. 206. SELF REGULATORY ORGANIZATION DISCIPLINARY COMMITTEES AND GOVERNING BOARDS. (a) Contract Markets.— (1) Governing boards and disciplinary committees.— Subsection (a) of section 5a (7 U.S.C. 7a) (as amended by sections 201(a)(1) and 217 of this Act) is further amended by adding at the end the following new paragraphs: “(14) (A) provide for meaningful representation on the governing board of the contract market’s board of trade of a diversity of interests, including— “(i) futures commission merchants; “(ii) producers of, and consumers, processors, distributors, or merchandisers of, principal commodities traded on the board of trade; “(iii) floor brokers and traders; and “(iv) participants in a variety of pits or principal groups of commodities traded on the exchange. “(B) provide that no less than 20 percent of the regular voting members of such board be comprised of nonmembers of such contract market’s board of trade with— “(i) expertise in futures trading, or the regulation thereof, or in commodities traded through contracts on the board of trade; or “(ii) other eminent qualifications making such person capable of participating in and contributing to board deliberations. “(C) provide that no less than 10 percent of the regular voting members of such board be comprised where applicable of farmers, producers, merchants, or exporters of principal commodities traded on the exchange; “(15) (A) provide on all major disciplinary committees for a diversity of membership sufficient to ensure fairness and to prevent special treatment or preference for any person in the conduct of disciplinary proceedings and the assessment of penalties. “(B) Consistent with Commission rules, a major disciplinary committee hearing a disciplinary matter shall include— “(i) a majority of qualified persons representing a trading status other than that of the subject of the proceeding; and “(ii) where appropriate to carry out the purposes of this Act, qualified persons who are not members of the exchange. “(C) For purposes of this paragraph, a trading status on a contract market may include, consistent with Commission rules, such categories as (i) floor brokers and traders; (ii) producers, consumers, processors, distributors, or merchandisers of commodities; (iii) futures commission merchants; and (iv) members of the aforementioned categories who participate in particular contract markets or principal groups of commodities on the board of trade. “(D) If a contract market takes final disciplinary action against a member for a violation that involves the execution of a customer transaction and results in financial harm to such customer, the contract market shall promptly inform the futures commission merchant identified on the records of such contract market as having cleared such transaction, and such futures commission merchant shall promptly inform the person identified on its records as the owner of the account for which such transaction was executed, of the disciplinary action and the principal facts thereof; “(16) provide that no member found by the Commission, a contract market, a registered futures association, or a court of competent jurisdiction to have committed any violation of this Act or any other provision of law that would reflect on the fitness of the member may serve on any contract market oversight or disciplinary panel for an appropriate period (as defined by Commission rule); and”. (2) Major disciplinary rule violations.— Section 8c (7 U.S.C. 12c) is amended— (A) by redesignating subsections (1) through (4) as subsections (a) through (d); (B) in subsection (a), as so redesignated— (i) by striking “(A)” and inserting “(1)”; and (ii) by striking “(B)” and inserting “(2)”; (C) in subsection (c), as so redesignated, by striking “subsection (2)” each place it appears and inserting “subsection (b)”; (D) in subsection (d), as so redesignated, by striking “subsection (1)” and inserting “subsection (a)”; and (E) by adding at the end the following: “(e) (1) The Commission shall issue regulations requiring each contract market to establish and make available to the public a schedule of major violations of any rule within the disciplinary jurisdiction of such contract market. “(2) The regulations issued by the Commission pursuant to this subsection shall prohibit, for a period of time to be determined by the Commission, any individual who is found to have committed any major violation from service on the governing board of any contract market or registered futures association, or on any disciplinary committee thereof.” (b) Registered Futures Associations.— (1) Governing boards and disciplinary committees.— Section 17(b) (7 U.S.C. 21(b)) is amended— (A) in subparagraphs (A) and (B) of paragraph (3) by striking “or” at the end; (B) in paragraphs (3)(D), (4)(A), (4)(B), (4)(C), (4)(D), (4)(F), (5), (6), (7), (8), (9), (9)(A), (9)(B), and (9)(D) by striking the period at the end and inserting a semicolon; (C) in paragraphs (4)(E), (9)(C), and (10) by striking the period at the end and inserting “; and”; and . (D) by adding at the end the following new paragraphs: “(11) such association provides for meaningful representation on the governing board of such association of a diversity of membership interests and provides that no less than 20 percent of the regular voting members of such board be comprised of qualified nonmembers of or persons who are not regulated by such association. “(12) (A) such association provides on all major disciplinary committees for a diversity of membership sufficient to ensure fairness and to prevent special treatment or preference for any person in the conduct of disciplinary proceedings and the assessment of penalties. “(13) heading>A major disciplinary committee hearing a disciplinary matter shall include— “(A) qualified persons representing segments of the association membership other than that of the subject of the proceeding; and “(B) where appropriate to carry out the purposes of this paragraph, qualified persons who are not members of the association.”. (2) Major disciplinary rule violations.— Section 17 (7 U.S.C. 21), as amended by section 204, is amended by inserting after subsection (p) the following: “(q) (1) The Commission shall issue regulations requiring each registered futures association to establish and make available to the public a schedule of major violations of any rule within the disciplinary jurisdiction of such registered futures association. “(2) The regulations issued by the Commission pursuant to this subsection shall prohibit, for a period of time to be determined by the Commission, any member of a registered futures association who is found to have committed any major violation from service on the governing board of any registered futures association or contract market, or on any disciplinary committee thereof.” (c) Implementation.— Not later than two hundred and seventy 7 USC 7a note. days after the date of enactment of this Act, the Commodity Futures Trading Commission shall adopt such rules as are necessary to carry out the amendments made by subsections (a) and (b), including rules that— (1) specify membership categories that shall be represented on disciplinary panels; (2) define major disciplinary committee” for purposes of sections 5a(a)(15) and 17(b)(12) of the Commodity Exchange Act (as added by subsections (a) and (b), respectively); and (3) specify the conditions under which such panels shall include qualified persons who are not members of the exchange or association, which shall include at a minimum— (A) any disciplinary action where the subject of such action is a member of the contract market or association governing board or of any major disciplinary committee of such contract market or association; and (B) any disciplinary action based on facts related to a claim that the subject of such action manipulated or attempted to manipulate the price of a commodity or future or option. SEC. 207. REQUIRED REGISTRATION OF FLOOR TRADERS. (a) Requirement.— Section 4e (7 U.S.C. 6e) is amended to read as follows: “Sec. 4e. It shall be unlawful for any person to act as floor trader in executing purchases and sales, or as floor broker in executing any orders for the purchase or sale, of any commodity for future delivery, or involving any contracts of sale of any commodity for future delivery, on or subject to the rules of any contract market unless such person shall have registered, under this Act, with the Commission as such floor trader or floor broker and such registration shall not have expired nor been suspended nor revoked. (b) Conforming Amendments.— The Act is amended— (1) in sections 4f(1), 4g(1), and 6d(1) (7 U.S.C. 6f(1), 6g(1), 13a–2(1)), by striking “or floor broker” and inserting “floor broker, or floor trader; (2) in section 6d(8)(A) (7 U.S.C. 13a–2(8)(A)), by inserting “, floor trader,” after “floor broker”; (3) in section 8a(1), (7 U.S.C. 12a(1)), by striking “and floor brokers” and inserting “floor brokers, and floor traders”; and (4) in sections 8a(2)(C)(i), 8a(2)(D)(ii), and 8a(3)(E)(ii) (7 U.S.C. 12a(2)(C)(i), 12a(2)(D)(ii), and 12a(3)(E)(ii)), by inserting “floor trader,” after “floor broker,”. (c) Regulations.— The amendments made by this section shall become effective one hundred and eighty days after the date of enactment of this Act, and the Commodity Futures Trading Commission shall issue any regulations necessary to implement the amendments made by this section no later than one hundred and eighty days after the date of enactment of this Act. SEC. 208. ENHANCEMENT OF REGISTRATION REQUIREMENTS. (a) Injunctions.— Section 8a(2)(C)(ii) (7 U.S.C. 12a(2)(C)(ii)) is amended to read as follows: “(ii) engaging in or continuing any activity where such activity involves embezzlement, theft, extortion, fraud, fraudulent conversion, misappropriation of funds, securities or property, forgery, counterfeiting, false pretenses, bribery, gambling, or any transaction in or advice concerning contracts of sale of a commodity for future delivery, concerning matters subject to Commission regulation under section 4c or 19, or concerning securities”. (b) Certain Violations of Law.— Section 8a(2)(D)(iv) (7 U.S.C. 12a(2)(D(iv)) is amended by— (1) inserting “1001,” after “152,”; (2) striking “or” after “1342,”; (3) inserting “1503, 1623, 1961, 1962, 1963, or 2314,” after “1343,”; and (4) inserting “, or section 7201 or 7206 of the Internal Revenue Code of 1986” after “Code”. (c) Other Violations of Law.— Section 8a(2)(E) (7 U.S.C. 12a(2)(E)) is amended— (1) by striking “by any court of competent jurisdiction,” and inserting “in a proceeding brought”; and (2) in clause (i) by inserting “chapter 96 of title 18 of the United States Code,” after “1977,”. (d) Registration Revocation Based on Inaccurate Statements.— Section 8a(2)(G) (7 U.S.C. 12a(2)(G)) is amended by— (1) striking “subparagraphs (A) through (F) of this paragraph,” and inserting “this paragraph and paragraph (3),”; (2) striking “material” the first place it appears and inserting “materially”; and (3) striking “application” and inserting “application or any update thereto”. (e) General Felony Convictions.— Section 8a(3)(D) (7 U.S.C. 12a(3)(D)) is amended by— (1) inserting “pleaded guilty to or” after “person”; (2) inserting a comma after “section” the first place it appears; (3) striking “within ten years preceding the filing of the application or at any time thereafter,”; (4) striking “, including a felony”; and (5) striking “, more than” and inserting “more than”. (f) Special Felony Convictions.— Section 8a(3)(E) (7 U.S.C. 12a(3)(E)) is amended— (1) by inserting “pleaded guilty to or” after “person”; (2) by striking “within ten years preceding the filing of the application for registration or at any time thereafter”; and (3) in clause (iv) by inserting “, or section 7203, 7204, 7205, or 7207 of the Internal Revenue Code of 1986” after “Code”. (g) Registration Denied or Conditioned Based on Inaccurate Statements.— Section 8a(3)(G) (7 U.S.C. 12a(3)(G)) is amended by— (1) striking “material” the first place it appears and inserting “materially”; (2) striking the comma after “application”; (3) inserting “or any update thereto,” after “application”; (4) striking “thereunder, or” and inserting “thereunder,”; and (5) inserting “or in any registration disqualification proceeding” after “Commission”. (h) Non-Federal Criminal Conduct.— Section 8a(3)(H) (7 U.S.C. 12a(3)(H)) is amended by inserting “, in a United States military court,” after “State court”. (i) Existing Restrictions on Memberships.— Section 8a(3)(J) (7 U.S.C. 12a(3)(J)) is amended by— (1) striking “or” after “association,” the first place it appears; (2) inserting “or any foreign regulatory body that the Commission recognizes as having a comparable regulatory program” after “organization,” the first place it appears; (3) striking “or” after “association,” the second place it appears; and (4) striking “organization;” and inserting “organization, or foreign regulatory body;”. SEC. 209. ENFORCEMENT OF CIVIL MONEY PENALTIES. (a) Money Penalties.— Section 6 (7 U.S.C. 8 et seq.) is amended— (1) by redesignating subsections (a) through (d) as subsections (b) through (e), respectively; (2) by inserting “(a)” after “Sec. 6”; (3) in subsection (a), as so redesignated, by striking “paragraph (a)” and inserting “subsection (b)”; (4) in subsection (d), as so redesignated— (A) by striking “paragraph (b) of this section” and inserting “subsection (c)”; and (B) by striking “section 6(b) of this Act” and inserting “subsection (c)”; and (5) by amending subsection (e), as so redesignated, to read as follows: “(e) (1) In determining the amount of the money penalty assessed under subsection (c), the Commission shall consider the appropriateness of such penalty to the gravity of the violation. “(2) Unless the person against whom a money penalty is assessed under subsection (c) shows to the satisfaction of the Commission within fifteen days from the expiration of the period allowed for payment of such penalty that either an appeal as authorized by subsection (c) has been taken or payment of the full amount of the penalty then due has been made, at the end of such fifteen-day period and until such person shows to the satisfaction of the Commission that payment of such amount with interest thereon to date of payment has been made— “(A) such person shall be prohibited automatically from trading on all contract markets; and “(B) if such person is registered with the Commission, such registration shall be suspended automatically. “(3) If a person against whom a money penalty is assessed under subsection (c) takes an appeal and if the Commission prevails or the appeal is dismissed, unless such person shows to the satisfaction of the Commission that payment of the full amount of the penalty then due has been made by the end of thirty days from the date of entry of judgment on the appeal— “(A) such person shall be prohibited automatically from trading on all contract markets; and “(B) if such person is registered with the Commission, such registration shall be suspended automatically. If the person against whom the money penalty is assessed fails to pay such penalty after the lapse of the period allowed for appeal or after the affirmance of such penalty, the Commission may refer the matter to the Attorney General who shall recover such penalty by action in the appropriate United States district court.”. (b) Conforming Amendments.— The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended— (1) in section 2(a)(1)(B)(iv)— (A) in subclause (I) by striking “section 6(b)” and inserting “section 6(c)”; and (B) in subclause (II) by striking “section 6(a)” and inserting “section 6(b)”; (2) in section 5(6), as so redesignated by section 201(c)(2), by striking “paragraph (b) of section 6” and inserting “section 6(c)”; (3) in section 5b by striking “paragraph (a) of section 6” 7 USC 7b. and inserting “section 6(b)”; (4) in section 6a(1) by striking “paragraph (a) of section 7 USC 10a. 6” and inserting “section 6(b)”; (5) in section 6b by striking “paragraph (a) of section 6” 7 USC 13a. and inserting “section 6(b)”; (6) in section 8a— 7 USC 12a. (A) in the first proviso to paragraph (2) by striking “section 6(b)” and inserting “section 6(c)”; (B) in the second proviso to paragraph (3) by striking “section 6(b)” and inserting “section 6(c)”; and (C) in paragraph (4) by striking “section 6(b)” each place it appears and inserting “section 6(c)”; (7) in section 14(e) by striking “paragraph (b) of section 7 USC 18. 6” and inserting “section 6(c)”; and (8) in section 17— 7 USC 21. (A) in subsection (b)— (i) in paragraph (3)(B) by striking “section 6(b)” and inserting “section 6(c)”; and (ii) in paragraph (4)(F) by striking “subsection (b)” of section and inserting “section 6(c)”; (B) in subsection (i)(4) by striking “section 6(b)” and inserting “section 6(c)”; and (C) in subsection (o)(4) by striking “section 6(b)” and inserting “section 6(c)”. SEC. 210. ETHICS TRAINING FOR REGISTRANTS. (a) Mandatory Training for Registrants.— Section 4p (7 U.S.C. 6p) is amended by— (1) inserting “(a)” after “Sec. 4p.”; and (2) adding at the end the following: “(b) The Commission shall issue regulations to require new registrants, within six months after receiving such registration, to attend a training session, and all other registrants to attend periodic training sessions, to ensure that registrants understand their responsibilities to the public under this Act, including responsibilities to observe just and equitable principles of trade, any rule or regulation of the Commission, any rule of any appropriate contract market, registered futures association, or other self-regulatory organization, or any other applicable Federal or state law, rule or regulation.”. (b) Regulations.— The Commodity Futures Trading Commission 7 USC 6p note. shall issue the regulations required by section 4p(b) of the Commodity Exchange Act, as added by subsection (a), no later than one hundred and eighty days after the date of enactment of this Act. SEC. 211. NATIONWIDE SERVICE OF PROCESS AND VENUE. Section 22(c) (7 U.S.C. 25(c)) is amended to read as follows: “(c) The United States district courts shall have exclusive jurisdiction Courts. of actions brought under this section. Any such action shall be brought not later than two years after the date the cause of action arises. Any action brought under subsection (a) of this section may be brought in any judicial district wherein the defendant is found, resides, or transacts business, or in the judicial district wherein any act or transaction constituting the violation occurs. Process in such action may be served in any judicial district of which the defendant is an inhabitant or wherever the defendant may be found.”. SEC. 212. INCREASED PENALTIES. (a) Felony Violations.— Section 9 (7 U.S.C. 13) is amended— (1) by— (A) striking subsections (a), (b), and (c); (B) redesignating subsections (d) and (e) as subsections (c) and (d), respectively; and (C) inserting before subsection (c), as redesignated, the following new subsections: “(a) It shall be a felony punishable by a fine of not more than $1,000,000 (or $500,000 in the case of a person who is an individual) or imprisonment for not more than five years, or both, together with the costs of prosecution, for: “(1) Any person registered or required to be registered under this Act, or any employee or agent thereof, to embezzle, steal, purloin, or with criminal intent convert to such person’s use or to the use of another, any money, securities, or property having a value in excess of $100, which was received by such person or any employee or agent thereof to margin, guarantee, or secure the trades or contracts of any customer or accruing to such customer as a result of such trades or contracts or which otherwise was received from any customer, client, or pool participant in connection with the business of such person. The word ‘value’ as used in this paragraph means face, par, or market value, or cost price, either wholesale or retail, whichever is greater. “(2) Any person to manipulate or attempt to manipulate the price of any commodity in interstate commerce, or for future delivery on or subject to the rules of any contract market, or to comer or attempt to comer any such commodity or knowingly to deliver or cause to be delivered for transmission through the mails or interstate commerce by telegraph, telephone, wireless, or other means of communication false or misleading or knowingly inaccurate reports concerning crop or market information or conditions that affect or tend to affect the price of any commodity in interstate commerce, or knowingly to violate the provisions of section 4, section 4b, sub-sections (a) through (e) of subsection 4c, section 4h, section 4o(l), or section 19. “(3) Any person knowingly to make, or cause to be made, any statement in any application, report, or document required to be filed under this Act or any rule or regulation thereunder or any undertaking contained in a registration statement required under this Act, or by any contract market or registered futures association in connection with an application for membership or participation therein or to become associated with a member thereof, which statement was false or misleading with respect to any material fact, or knowingly to omit any material fact required to be stated therein or necessary to make the statements therein not misleading. “(4) Any person willfully to falsify, conceal, or cover up by any trick, scheme, or artifice a material fact, make any false, fictitious, or fraudulent statements or representations, or make or use any false writing or document knowing the same to contain any false, fictitious, or fraudulent statement or entry to a contract market, board of trade, or futures association designated or registered under this Act acting in furtherance of its official duties under this Act. “(5) Any person willfully to violate any other provision of this Act, or any rule or regulation thereunder, the violation of which is made unlawful or the observance of which is required under the terms of this Act, but no person shall be subject to imprisonment under this paragraph for the violation of any rule or regulation if such person proves that he had no knowledge of such rule or regulation. “(b) Any person convicted of a felony under this section shall be suspended from registration under this Act and shall be denied registration or reregistration for five years or such longer period as the Commission may determine, and barred from using, or participating in any manner in, any market regulated by the Commission for five years or such longer period as the Commission shall determine, on such terms and conditions as the Commission may prescribe, unless the Commission determines that the imposition of such suspension, denial of registration or reregistration, or market bar is not required to protect the public interest. The Commission may upon petition later review such disqualification and market bar and for good cause shown reduce the period thereof.”; (2) in subsection (c) (as redesignated by paragraph (1) of this section) by striking “$100,000” and inserting “$500,000”; and (3) in subsection (d) (as redesignated by paragraph (1) of this section) by striking “$100,000” and inserting “$500,000”. (b) Other Violations.— Section 6(c) and 6(d) (7 U.S.C. 9 and 13b), as such subsections are redesignated by section 209, are each amended by striking “$100,000” each place it appears and inserting “the higher of $100,000 or triple the monetary gain to such person”. (c) Nonenforcement of Rules of Government or Other Violations.— Section 6b (7 U.S.C. 13a) is amended— (1) by striking “$100,000” each place it appears and inserting “$500,000”; and (2) in the last sentence, by striking “the appropriateness of such penalty to the net worth of the offending person and”. SEC. 213. CONTRACT MARKET EMERGENCY ACTIONS. (a) Prior Commission Notification Required.— Section 5a(a)(12) (7 U.S.C. 7a(12)), as redesignated by section 201, is amended— (1) by striking “(12) except” and inserting “(12)(A) except”; and (2) by striking the last two sentences of paragraph (12)(A) as so redesignated, and inserting the following: “(B) (i) The Commission shall issue regulations to specify the terms and conditions under which, in an emergency as defined by the Commission, a contract market may, by a two-thirds vote of its governing board, make a rule (hereinafter referred to as an emergency rule’) effective on a temporary basis without prior Commission approval, or without compliance with the ten-day notice requirement under subparagraph (A), or during any period of review by the Commission, if the contract market makes every effort practicable to notify the Commission of such emergency rule, along with a complete explanation of the emergency involved, prior to making the emergency rule effective. If the contract market does not provide the Commission with such notification and explanation before making the emergency rule effective, the contract market shall provide the Commission with such notification and explanation at the earliest possible date. The Commission may delegate the power to receive such notification and explanation to such individuals as the Commission determines necessary and appropriate. “(ii) Within ten days of the receipt from a contract market of notification of such an emergency rule and an explanation of the emergency involved, or as soon as practicable, the Commission shall determine whether it is appropriate either— “(I) to permit such rule to remain in effect during the pendency of the emergency, or “(II) to suspend the effect of such rule pending review either under the procedures of subparagraph (A) or otherwise. Reports. The Commission shall submit a report on its determination and the basis thereof with respect to such emergency rule to the affected contract market, to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate. If the report is submitted more than ten days after the Commission’s receipt of notification of such an emergency rule from a contract market, the report shall explain why submission within such ten-day period was not practicable. A determination by the Commission to suspend the effect of a rule under this subparagraph shall be subject to judicial review on the same basis as an emergency determination under section 8a(9). Nothing in this paragraph shall be construed to limit the authority of the Commission under section 8a(9);”. (b) Regulations.— The Commodity Futures Trading Commission shall issue regulations to implement section 5a(12)(B) of the Commodity Exchange Act, as added by subsection (a), no later than one hundred and eighty days after the date of enactment of this Act. Until the effective date of such regulations, any regulation of the Commission that implements the last two sentences of section 5a(12), as such sentences were in effect immediately before the date of enactment of this Act, shall remain in effect. SEC. 214. PROHIBITION AGAINST INSIDER TRADING. (a) In General.— Section 9 (7 U.S.C. 13) is amended by adding at the end the following: “(f) It shall be a felony for any person— “(1) who is an employee, member of the governing board, or member of any committee of a board of trade, contract market, or registered futures association, in violation of a regulation issued by the Commission, willfully and knowingly to trade for such person’s own account, or for or on behalf of any other account, in contracts for future delivery or options thereon on the basis of, or willfully and knowingly to disclose for any purpose inconsistent with the performance of such persons official duties as an employee or member, any material nonpublic information obtained through special access related to the performance of such duties. (2) willfully and knowingly to trade for such person’s own account, or for or on behalf of any other account, in contracts for future delivery or options thereon on the basis of any material nonpublic information that such person knows was obtained in violation of paragraph (1) from an employee, member of the governing board, or member of any committee of a board of trade, contract market, or registered futures association. Such felony shall be punishable by a fine of not more than $500,000, plus the amount of any profits realized from such trading or disclosure made in violation of this subsection, or imprisonment for not more than five years, or both, together with the costs of prosecution”. (b) Regulations.— The Commodity Futures Trading Commission 7 USC 13 note. shall issue regulations to implement the amendment made by subsection (a) not later than three hundred and sixty days after the date of enactment of this Act. SEC. 215. QUALIFICATIONS OF COMMISSIONERS. Section 2(a)(2)(A) (7 U.S.C. 4a(a)(1)) is amended by striking the second and third sentences and inserting the following: “The President. Commission shall be composed of five 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— “(i) select persons who shall each have demonstrated knowledge in futures trading or its regulation, or 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; and “(ii) seek to ensure that the demonstrated knowledge of the Commissioners is balanced with respect to such areas.”. SEC. 216. COMMISSION OPERATIONS. Section 12(b) (7 U.S.C. 16(b)) is amended— (1) by designating the first through third sentences as paragraphs (1) through (3), respectively, and (2) by adding at the end the following new paragraph: “(4) The Commission may request (in accordance with the procedures set forth in subchapter II of chapter 31 of title 5, United States Code) and the Office of Personnel Management shall authorize pursuant to the request, eight positions in the Senior Executive Service in addition to the number of such positions authorized for the Commission on the date of enactment of this sentence.”. SEC. 217. PROHIBITION ON VOTING BY INTERESTED MEMBERS. Subsection (a) of section 5a (7 U.S.C. 7a) (as amended by sections 201(a) and 206(a)(l) of this Act) is further amended by adding at the end the following: “(17) (A) provide for the avoidance of conflict of interest in deliberations by the governing board and any disciplinary and oversight committees. In order to comply with this subparagraph, each contract market shall adopt rules and procedures to require, at a minimum, that “(i) any member of a governing board or a disciplinary or other oversight committee must abstain from confidential deliberations and voting on any matter where the named party in interest is the member, the member’s employer, the member’s employee, or any other person that has a business, employment, or family relationship with the member that warrants abstention by the member; “(ii) any member of a governing board or a disciplinary or other oversight committee must abstain from voting on any significant action that would not be submitted to the Commission for its prior approval, if, as determined in accordance with regulations promulgated by the Commission, the member knowingly has a direct and substantial financial interest in the result of the vote, based either on positions held personally or at an affiliated firm; “(iii) prior to the deliberations of the governing board, disciplinary board, or other oversight committee, acting directly or indirectly through an authorized member or contract market official, the positions of the members of such board or committee, and positions of the firm or firms with which such members are affiliated, are reviewed: Provided, however, That no contract market or official, employee, member, other than the member whose position or positions are being reviewed, or agent thereof shall be subject to liability, except for liability in an action initiated by the Commission, for having conducted this review and for having taken or not taken further action; and “(iv) the board or committee shall clearly reflect, in the minutes of such meeting, that the review required in clause (iii) occurred and any decisions by a member to abstain or by the board or committee whether to direct a member or members to abstain from deliberations or voting on the matter before the board or committee. Any member prohibited from voting on a rule pursuant to this paragraph shall not be included in determining whether there has been a two-thirds vote of members of the governing board or committee as required by subparagraph (12). “(B) For the purposes of this paragraph, the term ‘significant action that would not be submitted to the Commission for its prior approval’ includes— “(i) any nonphysical emergency rule; or “(ii) any changes in margin levels designed to respond to extraordinary market conditions that are likely to have a substantial affect on prices in any contract traded on such contract market, but does not include any rule not submitted for prior Commission approval because such rule is unrelated to terms and conditions of any contract traded on such contract market. “(C) Notwithstanding the provisions of subparagraph (A)(ii), the Commission shall issue rules establishing the conditions under which a member of a board or committee who is required to abstain from voting on a significant action, as provided in subparagraph (A)(ii), may participate in deliberations on that action prior to such vote, where the member’s participation is consistent with the public interest.”. SEC. 218. STUDY OF ASSESSMENTS ON TRANSACTIONS. (a) Study.— The Comptroller General of the United States shall conduct a study to determine whether— (1) it is feasible to fund some or all of the enforcement and market surveillance activities of the Commodity Futures Trading Commission, as required by the amendments to the Commodity Exchange Act made by the Futures Trading Practices Act of 1992, through the imposition of an assessment on commodity futures and options transactions executed pursuant to the Commodity Exchange Act; and (2) a program of assessment-based funding for some or all of such enforcement and market surveillance activities would better provide resources to the Commodity Futures Trading Commission to enable the Commission to— (A) protect the interests of market users (including hedgers and speculators), producers of commodities traded on the futures markets, and the general public; and (B) maintain and enhance the credibility of such futures and options markets. (b) Report.— Not later than one year after the date of enactment of this Act, the Comptroller General shall submit to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate a report containing the Comptroller General’s determinations pursuant to subsection (a), together with any appropriate recommendations for the implementation of such a program of assessment-based funding for some or all of the Commodity Futures Trading Commission’s enforcement and market surveillance activities. SEC. 219. COMPETITIVENESS STUDY. (a) In General.— No later than eighteen months following the enactment of this Act, the Commodity Futures Trading Commission shall study the competitiveness of boards of trade over which it has jurisdiction compared with the boards of trade (or their foreign equivalent) over which foreign futures authorities, as defined in section 2(a)(1)(A) of the Commodity Exchange Act (7 U.S.C. 2(a)(l)(A)), have jurisdiction, and submit to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate a report of its findings with respect to— (1) the overall competitive status of United States boards of trade in the world market; (2) a comparison of applicable statutes, rules, or regulations as they relate to futures and options administered and enforced by the Commission and those administered and enforced by foreign futures authorities; (3) any trends in, or movements of, volume of futures and options trading to or from United States boards of trade during the period of the study, and whether such trends or movements, if any, were the result of the adoption of statutes, regulations, or other enforcement mechanisms in foreign countries or the United States, as opposed to other competitive, economic, regional, or commercial factors; (4) any significant harms or risks to the public interest, market users, traders, and commerce in relation to futures or options traded on such foreign boards of trade which may result from the absence of statutes, regulations, or other enforcement mechanisms in foreign countries or the United States or disparities in regulatory protections offered by United States and foreign authorities; and (5) any recommendations the Commission may have as a result of the study to enhance the competitive status of United States boards of trade in the world market, or to enhance the regulations of markets in the global environment, that will not impair customer confidence in United States boards of trade. (b) Cooperation.— To promote the efficient use of resources, the Commission shall endeavor, as it determines appropriate, to obtain the assistance of the General Accounting Office, the Office of the United States Trade Representative, or other appropriate offices of the Federal Government in order to obtain information with regard to trading at foreign boards of trade and the regulation of such boards of trade by foreign futures authorities. SEC. 220. COMPUTERIZED FUTURES TRADING. (a) International Competitiveness of Electronic Trading Systems.— Section 12 (7 U.S.C. 16) (as amended by section 303 of this Act) is further amended by adding at the end the following new subsection: “(g) Consistent with its responsibilities under section 18, the Commission is directed to facilitate the development and operation of computerized trading as an adjunct to the open outcry auction system. The Commission is further directed to cooperate with the Office of the United States Trade Representative, the Department of the Treasury, the Department of Commerce, and the Department of State in order to remove any trade barriers that may be imposed by a foreign nation on the international use of electronic trading systems.”. (b) Study.— The Commodity Futures Trading Commission shall conduct a study to assess— (1) the progress made under initiatives to conduct trading in futures and options subject to the jurisdiction of the Commission under the Commodity Exchange Act through systems of computers or by other electronic means; and (2) whether the experience with such systems of trading indicates that they may be useful or effective to enhance access to the futures and options markets by potential market participants, improve the ability of the Commission to audit the activities of the futures and options markets, reduce the opportunity for trading abuses, and otherwise be in the public interest or raise other related issues. (c) Report.— Not later than two years after the date of enactment of this Act, the Commission shall submit to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate a report containing the results of the study conducted under subsection (a), together with any appropriate recommendations. SEC. 221. MONEY PENALTIES IN CIVIL COURT ACTIONS. Section 6c (7 U.S.C. 13c) is amended— (1) by designating the first, second, third, fourth, fifth, and sixth sentences as subsections (a), (b), (c), (e), (f), and (g), respectively; and (2) by inserting after subsection (c) (as so designated) the following new subsection: “(d) (1) In any action brought under this section, the Commission may seek and the court shall have jurisdiction to impose, on a proper showing, on any person found in the action to have committed any violation a civil penalty in the amount of not more than the higher of $100,000 or triple the monetary gain to the person for each violation. “(2) If a person on whom such a penalty is imposed fails to pay the penalty within the time prescribed in the court’s order, the Commission may refer the matter to the Attorney General who shall recover the penalty by action in the appropriate United States district court.”. SEC. 222. CIVIL DAMAGES; LIABILITY OF FUTURES COMMISSION MERCHANTS. (a) Duties of Contract Markets.— Subsection (a)(11) of section 5a (7 U.S.C. 7a) (as amended by section 201(a)(1) of this Act) is further amended— (1) by striking “(i)” and inserting “(A)”; (2) by striking “voluntary and (ii)” and inserting “voluntary, (B)”; and (3) by inserting after the word “market” the following: “, and (C) in the case of a claim arising from a violation in the execution of an order on the floor of a contract market, such procedure shall provide, to the extent appropriate— “(i) for payment of actual damages proximately caused by such violation. If an award of actual damages is made against a floor broker in connection with the execution of a customer order, and the futures commission merchant which selected the floor broker for the execution of the customer order is held to be responsible under section 2(a)(1) for the floor broker’s violation, such futures commission merchant may be required to satisfy such award; and “(ii) where the violation is willful and intentional, for payment to the customer of punitive or exemplary damages, in addition to losses proximately caused by the violation, in an amount equal to no more than two times the amount of such losses. If punitive or exemplary damages are awarded against a floor broker in connection with the execution of a customer order, and the futures commission merchant which selected the floor broker for the execution of such order is held to be responsible under section 2(a)(1) for the floor broker’s violation, such futures commission merchant may be required to satisfy the award of punitive or exemplary damages if the floor broker fails to do so, except that such requirement shall apply to the futures commission merchant only if it willfully and intentionally selected the floor broker with the intent to assist or facilitate the floor broker’s violation;”. (b) Complaints Against Registered Persons.— Section 14(a) (7 U.S.C. 18(a)) is amended by striking “awarding actual damages proximately caused by such violation.” and inserting “ awarding— “(1) actual damages proximately caused by such violation. If an award of actual damages is made against a floor broker in connection with the execution of a customer order, and the futures commission merchant which selected the floor broker for the execution of the customer order is held to be responsible under section 2(a)(1) for the floor broker’s violation, such futures commission merchant may be required to satisfy such award; and “(2) in the case of any action arising from a willful and intentional violation in the execution of an order on the floor of a contract market, punitive or exemplary damages equal to no more than two times the amount of such actual damages. If an award of punitive or exemplary damages is made against a floor broker in connection with the execution of a customer order, and the futures commission merchant which selected the floor broker for the execution of the customer order is held to be responsible under section 2(a)(1) for the floor broker’s violation, such futures commission merchant may be required to satisfy such award if the floor broker fails to do so, except that such requirement shall apply to the futures commission merchant only if it willfully and intentionally selected the floor broker with the intent to assist or facilitate the floor broker’s violation.”. (c) Registered Futures Associations.— Section 17(b)(10) (7 U.S.C. 21(b)(10)) (as amended by section 206(b)(1) of this Act) is further amended— (1) by striking “(i)” and inserting “(A)”; (2) by striking “voluntary and (ii)” and inserting “voluntary, (B)”; and (3) by inserting after the word “association” the following: “, and (C) in the case of a claim arising from a violation in the execution of an order on the floor of a contract market, such procedure shall provide, to the extent appropriate— “(i) for payment of actual damages proximately caused by such violation. If an award of actual damages is made against a floor broker in connection with the execution of a customer order, and the futures commission merchant which selected the floor broker for the execution of the customer order is held to be responsible under section 2(a)(1) for the floor broker’s violation, such futures commission merchant may be required to satisfy such award; and “(ii) where the violation is willful and intentional, for payment to the customer of punitive or exemplary damages, in addition to losses proximately caused by the violation, in an amount equal to no more than two times the amount of such losses. If punitive or exemplary damages are awarded against a floor broker in connection with the execution of a customer order, and the futures commission merchant which selected the floor broker for the execution of such order is held to be responsible under section 2(a)(1) for the floor broker’s violation, such futures commission merchant may be required to satisfy the award of punitive or exemplary damages if the floor broker fails to do so, except that such requirement shall apply to the futures commission merchant only if it willfully and intentionally selected the floor broker with the intent to assist or facilitate the floor broker’s violation”. (d) Private Rights of Action.— Section 22(a) (7 U.S.C. 25(a)) is amended by adding at the end the following new paragraph: “(3) In any action arising from a violation in the execution of an order on the floor of a contract market, the person referred to in paragraph (1) shall be liable for— “(A) actual damages proximately caused by such violation. If an award of actual damages is made against a floor broker in connection with the execution of a customer order, and the futures commission merchant which selected the floor broker for the execution of the customer order is held to be responsible under section 2(a)(1) for the floor broker’s violation, such futures commission merchant may be required to satisfy such award; and “(B) where the violation is willful and intentional, punitive or exemplary damages equal to no more than two times the amount of such actual damages. If an award of punitive or exemplary damages is made against a floor broker in connection with the execution of a customer order, and the futures commission merchant which selected the floor broker for the execution of the customer order is held to be responsible under section 2(a)(1) for the floor broker’s violation, such futures commission merchant may be required to satisfy such award if the floor broker fails to do so, except that such requirement shall apply to the futures commission merchant only if it willfully and intentionally selected the floor broker with the intent to assist or facilitate the floor broker’s violation.#x201D;. SEC. 223. CUSTOMER RESTITUTION. The tenth sentence of section 6(c) (7 U.S.C. 9) (as redesignated by section 209(a)(1) of this Act) is amended— (1) by inserting “(1)” after “may” the first place it appears; (2) by striking “and, if” and inserting “(2) if”; (3) by striking “may suspend” and inserting “suspend”; (4) by striking “and may” and inserting “(3)”; and (5) by inserting before the period the following: “and (4) require restitution to customers of damages proximately caused by violations of such persons”. SEC. 224. COMPLAINTS AGAINST REGISTERED PERSONS; CLASS ACTION SUITS. Section 14(a) (7 U.S.C. 18(a)) (as amended by section 222(b) of this Act) is further amended— (1) by redesignating paragraphs (1) and (2) as subparagraphs (A) and (B), respectively; (2) by inserting “(1)” after the subsection designation; and (3) by adding at the end the following new paragraph: “(2) (A) An action may be brought under this subsection by any one or more persons described in this subsection for and in behalf of such person or persons and other persons similarly situated, if the Commission permits such actions pursuant to a final rule issued by the Commission. “(B) Not later than two hundred and seventy days after the date of enactment of this paragraph, the Commission shall propose and publish for public comment such rules as are necessary to carry out subparagraph (A). In developing such rules, the Commission shall consider the potential impact of such actions on resources available to the reparations system established under this Act and the relative merits of bringing such actions in Federal court.”. SEC. 225. PENALTIES STUDY AND GUIDELINES. (a) Study.— The Commodity Futures Trading Commission shall study the penalties the Commission imposes against persons found to have violated the Commodity Exchange Act (7 U.S.C. 1 et seq.) and the penalties imposed by contract markets and registered futures associations against persons found to have violated their respective rules established under such Act. (b) Report.— Not later than two years after the date of enactment of this Act, the Commission shall submit to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate a report that describes the results of the study conducted under subsection (a). The report shall— (1) include an analysis of whether systematic differences exist among penalties imposed by various contract markets and registered futures associations for similar offenses, and, if so, the causes of such differences; (2) propose industry-wide guidelines or rules to make penalty levels among contract markets and registered futures associations consistent, including, if appropriate, minimum penalties or penalty ranges for various offenses; and (3) propose guidelines or rules to make Commission penalty levels consistent, including, if appropriate, minimum penalties or penalty ranges for various offenses. SEC. 226. PUBLICATION OF COMMISSION OPINIONS. Section 2(a)(9) (7 U.S.C. 4a(h)) is amended by adding at the end the following new subparagraph: “(C) Whenever the Commission issues for official publication any opinion, release, rule, order, interpretation, or other determination on a matter, the Commission shall provide that any dissenting, concurring, or separate opinion by any Commissioner on the matter be published in full along with the Commission opinion, release, rule, order, interpretation, or determination.” SEC. 227. SUSPENSION OF REGISTRANTS CHARGED WITH FELONIES. Section 8a (7 U.S.C. 12a) is amended— (1) by striking “and” at the end of paragraph (9); (2) by striking the period at the end of paragraph (10) and inserting “; and”; and (3) by adding at the end the following new paragraph: “(11) (A) by written notice served on the person and pursuant to such rules, regulations, and orders as the Commission may adopt, to suspend or modify the registration of any person registered under this Act who is charged (in any information, indictment, or complaint authorized by a United States attorney or an appropriate official of any State) with the commission of or participation in a crime involving a violation of this Act, or a violation of any other provision of Federal or State law that would reflect on the honesty or the fitness of the person to act as a fiduciary (including an offense specified in subparagraph (D) or (E) of paragraph (2)) that is punishable by imprisonment for a term exceeding one year, if the Commission determines that continued registration of the person may pose a threat to the public interest or may threaten to impair public confidence in any market regulated by the Commission. “(B) Prior to the suspension or modification of the registration of a person under this paragraph, the person shall be afforded an opportunity for a hearing at which the Commission shall have the burden of showing that the continued registration of the person does, or is likely to, pose a threat to the public interest or threaten to impair public confidence in any market regulated by the Commission. “(C) Any notice of suspension or modification issued under this paragraph shall remain in effect until such information, indictment, or complaint is disposed of or until terminated by the Commission. “(D) On disposition of such information, indictment, or complaint, the Commission may issue and serve on such person an order pursuant to paragraph (2) or (4) to suspend, restrict, or revoke the registration of such person. “(E) A finding of not guilty or other disposition of the charge shall not preclude the Commission from thereafter instituting any other proceedings under this Act. “(F) A person aggrieved by an order issued under this paragraph may obtain review of such order in the same manner and on the same terms and conditions as are provided in section 6(b).”. SEC. 228. APPEALS BY REGISTERED FUTURES ASSOCIATIONS. Section 17(i)(4) (7 U.S.C. 21(i)(4)) is amended by striking “(other than a registered futures association).” SEC. 229. RISK ASSESSMENT FOR HOLDING COMPANY SYSTEMS. Section 4f (7 U.S.C. 60 (as amended by section 207(b)(1) of this Act) is further amended— (1) by redesignating paragraphs (1) and (2) as subsections (a) and (b), respectively; (2) in subsection (b) (as so redesignated), by striking “this paragraph (2)” and inserting “this subsection”; and (3) by adding at the end the following new subsection: “(c) (1) As used in this subsection: “(i) The term ‘affiliated person’ means any person directly or indirectly controlling, controlled by, or under common control with a futures commission merchant, as the Commission, by rule or regulation, may determine will effectuate the purposes of this subsection. “(ii) The term ‘Federal banking agency’ shall have the same meaning as the term ‘appropriate Federal banking agency’ in section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)). “(2) (A) Each registered futures commission merchant shall Records. obtain such information and make and keep such records as the Commission, by rule or regulation, prescribes concerning the registered futures commission merchant’s policies, procedures, or systems for monitoring and controlling financial and operational risks to it resulting from the activities of any of its affiliated persons, other than a natural person. “(B) The records required under subparagraph (A) shall describe, in the aggregate, each of the futures and other financial activities conducted by, and the customary sources of capital and funding of, those of its affiliated persons whose business activities are reasonably likely to have a material impact on the financial or operational condition of the futures commission merchant, includ-ing its adjusted net capital, its liquidity, or its ability to conduct or finance its operations. “(C) The Commission, by rule or regulation, may require summary reports of such information to be filed by the futures commission merchant with the Commission no more frequently than quarterly. “(3) (A), If, as a result of adverse market conditions or based on reports provided to the Commission pursuant to paragraph (2) or other available information, the Commission reasonably concludes that the Commission has concerns regarding the financial or operational condition of any registered futures commission merchant, the Commission may require the futures commission merchant to make reports concerning the futures and other financial activities of any of such person’s affiliated persons, other than a natural person, whose business activities are reasonably likely to have a material impact on the financial or operational condition of the futures commission merchant. “(B) The Commission, in requiring reports pursuant to this paragraph, shall specify the information required, the period for which it is required, the time and date on which the information must be furnished, and whether the information is to be furnished directly to the Commission or to a contract market or other self- regulatory organization with primary responsibility for examining the registered futures commission merchant’s financial and operational condition. “(4) (A) in developing and implementing reporting requirements pursuant to paragraph (2) with respect to affiliated persons subject to examination by or reporting requirements of a Federal banking agency, the Commission shall consult with and consider the views of each such Federal banking agency. If a Federal banking agency comments in writing on a proposed rule of the Commission under this subsection that has been published for comment, the Commission shall respond in writing to the written comment before adopting Federal Register, publication. the proposed rule. The Commission shall, at the request of the Federal banking agency, publish the comment and response in the Federal Register at the time of publishing the adopted rule. “(B) (i) Except as provided in clause (ii), a registered futures commission merchant shall be considered to have compiled with a recordkeeping or reporting requirement adopted pursuant to paragraph (2) concerning an affiliated person that is subject to examination by, or reporting requirements of, a Federal banking agency if the futures commission merchant utilizes for the recordkeeping or reporting requirement copies of reports filed by the affiliated person with the Federal banking agency pursuant to section 5211 of the Revised Statutes (12 U.S.C. 161), section 9 of the Federal Reserve Act (12 U.S.C. 321 et seq.), section 7(a) of the Federal Deposit Insurance Act (12 U.S.C. 1817(a), section 10(b) of the Home Owners’ Loan Act (12 U.S.C. 1467a(b)), or section 5 of the Bank Holding Company Act of 1956 (12 U.S.C. 1844). “(ii) The Commission may, by rule adopted pursuant to paragraph (2), require any futures commission merchant filing the reports with the Commission to obtain, maintain, or report supplemental information if the Commission makes an explicit finding that the supplemental information is necessary to inform the Commission regarding potential risks to the futures commission merchant. Prior to requiring any such supplemental information, the Commission shall first request the Federal banking agency to expand its reporting requirements to include the information. “(5) Prior to making a request pursuant to paragraph (3) for information with respect to an affiliated person that is subject to examination by or reporting requirements of a Federal banking agency, the Commission shall— “(A) notify the agency of the information required with respect to the affiliated person; and “(B) consult with the agency to determine whether the information required is available from the agency and for other purposes, unless the Commission determines that any delay resulting from the consultation would be inconsistent with ensuring the financial and operational condition of the futures commission merchant or the stability or integrity of the futures markets. “(6) Nothing in this subsection shall be construed to permit the Commission to require any futures commission merchant to obtain, maintain, or furnish any examination report of any Federal banking agency or any supervisory recommendations or analysis contained in the report. “(7) No information provided to or obtained by the Commission from any Federal banking agency pursuant to a request under paragraph (5) regarding any affiliated person that is subject to examination by or reporting requirements of a Federal banking agency may be disclosed to any other person (other than as provided in section 8 or section 8a(6)), without the prior written approval of the Federal banking agency. “(8) The Commission shall notify a Federal banking agency of any concerns of the Commission regarding significant financial or operational risks resulting from the activities of any futures commission merchant to any affiliated person thereof that is subject to examination by or reporting requirements of the Federal banking agency. “(9) The Commission, by rule, regulation, or order, may exempt any person or class of persons under such terms and conditions and for such periods as the Commission shall provide in the rule, regulation, or order, from this subsection and the rules and regulations issued under this subsection. In granting the exemption, the Commission shall consider, among other factors— “(A) whether information of the type required under this subsection is available from a supervisory agency (as defined in section 1101(7) of the Right to Financial Privacy Act of 1978 (12 U.S.C. 3401(7))), a State insurance commission or similar State agency, the Securities and Exchange Commission, or a similar foreign regulator; “(B) the primary business of any affiliated person; “(C) the nature and extent of domestic or foreign regulation of the affiliated person’s activities; “(D) the nature and extent of the registered futures commission merchant’s commodity futures and options activities; and “(E) with respect to the registered futures commission merchant and its affiliated persons, on a consolidated basis, the amount and proportion of assets devoted to, and revenues derived from activities in the United States futures markets. “(10) Information required to be provided pursuant to this subsection shall be subject to section 8. Except as specifically provided in section 8 and notwithstanding any other provision of law, the Commission shall not be compelled to disclose any information required to be reported under this subsection, or any information supplied to the Commission by any domestic or foreign regulatory agency that relates to the financial or operational condition of any affiliated person of a registered futures commission merchant. “(11) Nothing in paragraphs (1) through (10) shall be construed to supersede or to limit in any way the authority or powers of the Commission pursuant to any other provision of this Act or regulations issued under this Act.”.

19. 1992

    Futures Trading Practices Act of 1992

    Pub. L. 102–546 title II · 106 Stat. 3590

    1. Substituted · 7 U.S.C. § 21(b)(4)

       Pub. L. 102–546, §§ 206(b)(1)(B), (C), 209(b)(8)(A)(ii), substituted a semicolon for period at end of subpars. (A) to (D), in subpar. (E) substituted “; and” for period at end, and in subpar. (F) made technical amendment to reference to sections 9 and 15 of this title to reflect change in reference to corresponding section of original act

    2. Substituted · 7 U.S.C. § 21(b)(4)

       Pub. L. 102–546, §§ 206(b)(1)(B), (C), 209(b)(8)(A)(ii), substituted a semicolon for period at end

    Source evidence

    Code amendment note
    Subsec. (b)(4). Pub. L. 102–546, §§ 206(b)(1)(B), (C), 209(b)(8)(A)(ii), substituted a semicolon for period at end of subpars. (A) to (D), in subpar. (E) substituted “; and” for period at end, and in subpar. (F) made technical amendment to reference to sections 9 and 15 of this title to reflect change in reference to corresponding section of original act and substituted a semicolon for period at end.

    Enacted provision · exact public law
    TITLE II— ENHANCEMENT OF REGULATORY AND ENFORCEMENT ACTIVITIES SEC. 201. DUTIES OF CONTRACT MARKETS; AUDIT TRAILS. (a) In General.— Section 5a (7 U.S.C. 7a) is amended— (1) by inserting “(a)” after the section designation; and (2) by adding at the end the following new subsection: “(b) (1) Each contract market shall maintain and utilize a system to monitor trading to detect and deter violations of the contract market’s rules and regulations committed in the making of trades and the execution of customer orders on the floor or subject to the rules of such contract market. The system shall include— “(A) physical observation of trading areas; “(B) audit trail and recordkeeping systems able to capture essential data on the terms, participants, and sequence of transactions (including relevant data on unmatched trades and out-trades); “(C) systems capable of reviewing, and used to review, data on trades effectively on a regular basis to detect violations committed in making trades and executing customer orders on the floor or subject to the rules of such contract market, including— “(i) all types of violations attributable to dual trading; and “(ii) to the full extent feasible, as determined by the Commission, all other types of violations involving the making of trades and the execution of customer orders; “(D) the use of information gathered through such system on a consistent basis to bring appropriate disciplinary actions against violators; “(E) the commitment of resources to such system necessary for such system to be effective in detecting and deterring such violations, including adequate staff to develop and prosecute disciplinary actions; and “(F) the assessment of meaningful penalties against violators and the referral of appropriate cases to the Commission. “(2) The audit trail system of the contract market shall, consistent Records. with Commission regulations, accurately record— “(A) the times of trades in increments of no more than one minute in length; and “(B) the sequence of trades for each floor trader and broker. “(3) Beginning three years after the date of enactment of this Records. subsection, the audit trail system of each contract market, except as provided in paragraph (5) and except to the extent the Commission determines that circumstances beyond the control of the contract market prevent compliance despite the contract market’s affirmative good faith efforts to comply, shall— “(A) for all trades, record accurately and promptly the essential data on terms, participants, and times as required by the Commission by rule, including the time of execution of such trade, through a means that— “(i) records such data in a form which cannot be altered except in a manner that will leave a complete and independent record of such alteration; “(ii) continually provides such data to the contract market; “(iii) identifies such time, to the extent practicable as determined by the Commission— “(I) independently of the person making the trade; “(II) through a mechanism that records the time automatically when entered by the person making the trade; or “(III) through such other means that will capture a similarly reliable time; and “(iv) is adequately precise to determine, to the extent practicable as determined by the Commission by rule or order— “(I) the sequence of all trades by each floor trader; and “(II) the sequence of all trades by each floor broker; and “(B) to the extent practicable as determined by the Commission by rule or order, for customer trades, record the time that each order is received on the floor of the board of trade, is received by the floor broker for execution (or when such order is transmitted in an extremely rapid manner to the broker), and is reported from the floor of the board of trade as executed, through a means that— “(i) records such times in a form which cannot be altered except in a manner that will leave a complete and independent record of such alteration; “(ii) continually provides such data to the contract market; “(iii) identifies such time— “(I) independently of the person making the trade or processing the order; “(II) through a mechanism that records the time automatically when entered by the person making the trade or processing such order, as appropriate; or “(III) through such other means as will capture a similarly reliable time; and “(iv) is adequately precise to determine— “(I) the sequence in which, for each futures commission merchant, floor broker, or member firm, as applicable, all orders are received on and reported from the floor of the contract market; and “(II) the sequence in which orders are received by each floor broker for execution. “(4) The Commission may, by rule, establish standards under which the audit trail systems required under paragraph (3) shall record, to the extent practicable— “(A) the sequence of all trades made by all floor traders and floor brokers; and “(B) the interval between the time of receipt and the time of execution of each order by the floor broker executing the order. “(5) (A) The Commission shall, by rule or order, make exemptions from the requirements of paragraph (3)— “(i) for an exchange with respect to which the Commission finds that— “(I) the volume of trading on such exchange is relatively small and the exchange has demonstrated substantial compliance with the objectives of such paragraph; and “(II) the trade monitoring system at such exchange otherwise maintains a high level of compliance with this subsection; and “(ii) to the extent determined appropriate by the Commission, for categories of customer orders with respect to which the Commission finds that such orders are transmitted to and reported from the trading pit in an extremely rapid manner such that substantial compliance with the objectives of paragraph (3) can be otherwise achieved. “(B) For purposes of subparagraph (A)(i)(I) the Commission shall find that the volume of trading at an exchange is relatively small if, among other things, the Commission determines that the average daily trading volume for each contract market for which the board of trade is designated is less than the threshold trading level established for the contract market under section 4j(a)(4). “(6) Any rule or order adopted by the Commission under paragraphs Effective date. (4) and (5) shall become effective thirty legislative days or ninety calendar days, whichever is later, after submission of such rule or order to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate. For purposes of this paragraph, the term ‘legislative day’ means any day on which either House of Congress is in session.”. (b) Study.— (1) In general.— Not later than two years after the date 7 USC 7a note. Reports. of enactment of this Act, the Commodity Futures Trading Commission shall submit to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate a report that contains— (A) an assessment of the progress of each contract market in developing and implementing systems to record the times of transactions independently, precisely, and completely as required under section 5a(b) of the Commodity Exchange Act (as added by subsection (a) of this section); and (B) recommendations as to whether any extension of time for the completion of such systems or any modification of the standards contained in such section is appropriate. (2) GAO views.— The Comptroller General of the United States shall state to Congress the views of the Comptroller General with regard to the issues addressed in such report. (c) Audit Trail Compliance as Condition for Contract Market Designation.— Section 5 (7 U.S.C. 7) is amended by— (1) indenting the left margin of subdivisions (a) through (g) by 2 ems; (2) striking “(a)”, “(b)”, “(c)”, “(d)”, “(e)”, “(f)”, and “(g)”, and inserting “(1)”, “(2)”, “(3)”, ”(4)”, “(5)”, “(6)”, and “(7)”, respectively; and (3) adding at the end the following: “(8) When such board of trade demonstrates that every contract market for which such board of trade is designated complies with the requirements of section 5a(b).”. SEC. 202. COMMISSION OVERSIGHT; DEFICIENCY ORDERS. (a) In General.— The Act is amended by inserting after section 8d (7 U.S.C. 12d) the following new section: “SEC. 8e. COMMISSION OVERSIGHT; DEFICIENCY ORDERS. “(a) Assessments.— At least once every two years, to the extent practicable, the Commission shall assess whether the trade monitoring system of each contract market satisfies section 5a(b). “(b) Deficiency Orders.— “(1) Causes.— The Commission may issue a proposed deficiency order in accordance with paragraph (2), or take such other administrative or enforcement action as the Commission determines is appropriate, if, based on its assessment or on other information, the Commission at any time has reason to believe that a contract market’s trade monitoring system implemented pursuant to section 5a(b) does not satisfy one or more of the requirements of such section. “(2) Contents.— A proposed deficiency order issued under this subsection shall specify— “(A) the deficiencies the Commission has reason to believe exist in the trade monitoring system of the contract market and a statement of reasons supporting the Commission’s belief that those deficiencies exist; “(B) the corrective action that the Commission believes that the contract market must take and an acceptable timetable for such corrective action; and “(C) a date, not less than twenty days from the date of issuance of the proposed deficiency order, when such deficiency order will become final, subject to subsection (d). “(3) Remedies.— On becoming final, the Commission deficiency order may— “(A) require the contract market to— “(i) institute appropriate improvements in its trade monitoring system necessary to correct the deficiencies noted therein; “(ii) satisfy stated objective performance criteria to correct such deficiencies; “(iii) upgrade or reconfigure existing systems for collecting or processing relevant data on trading and trader or broker activity, including, where appropriate, the commitment of additional resources; or “(B) revoke any exemption of the contract market from the regulations prohibiting the privilege of dual trading under section 4j(a), if the deficiency noted in such deficiency order relates to— “(i) the audit trail system the contract market is required to maintain under paragraph (2), (3), or (4) of section 5a(b); or “(ii) the prevention, detection, or disciplining of violations attributable to such trading at such contract market, subject to the standards, exceptions, and duration provisions of section 4j(a); or “(C) take any combination of the actions described in subparagraphs (A) and (B). “(4) Removal.— If the Commission finds, after notice and opportunity for a hearing on the record prior to such deficiency order becoming final, that a named officer, director, committee member, or employee of such contract market has willfully— “(A) violated this Act, the rules or regulations of the Commission thereunder, or the rules of such contract market; “(B) abused the authority of such person; or “(C) without reasonable justification or excuse, failed to enforce compliance with any provision of the rules of such contract market by any member or person associated with a member thereof, the Commission may issue a deficiency order under this section to remove such officer, director, committee member, or employee. “(5) Designation as contract market.— Notwithstanding section 6, during the period that a proposed or final deficiency order under this section is in effect, the Commission may refrain from approving any application for designation as a contract market made by the board of trade whose contract market is the subject of such deficiency order. “(6) Delegation.— The Commission shall not delegate the authority to issue deficiency orders under this subsection. “(c) Rescission, Modification, or Delay of Deficiency Orders.— Before any proposed deficiency order issued by the Commission under subsection (b) may become final, the Commission shall— “(1) provide the affected contract market with an opportunity for a hearing through submission of written data, views, or arguments and, under terms set by the Commission at the request of the contract market, through an oral presentation of views and comments to the Commission, in order to petition the Commission to rescind, modify, or delay such deficiency order; and “(2) rule on such petition, not less than twenty days before the deficiency order takes effect, making findings, as appropriate, as to whether— “(A) the deficiencies cited by the Commission have been corrected or are being corrected under an expeditious timetable acceptable to the Commission; “(B) the trade monitoring system of the contract market is deficient as noted in the deficiency order; or “(C) the timetable for corrective action by the contract market in the proposed deficiency order, and the particular corrective action proposed, is appropriate in light of the deficiencies noted and the purposes of this Act. “(d) Penalties.— Violation of a final deficiency order issued under subsection (c) shall be considered a violation of an order of the Commission for purposes of— “(1) establishing liability and assessing penalties against a contract market or any director, officer, agent, or employee thereof under section 6b or 6c; or “(2) initiating proceedings under section 5b or 6(a). “(e) Judicial Review.— “(1) Persons.— Any person, other than a contract market, aggrieved by a deficiency order issued under subsection (b)(4), may obtain review of such deficiency order when issued by the Commission under the terms and conditions in section 6(b). “(2) Contract markets.— Any contract market that has petitioned the Commission to rescind, modify, or delay any proposed deficiency order issued under subsection (b) may obtain judicial review of any final such deficiency order only in the United States Court of Appeals for the circuit in which the party seeking review resides or has its principal place of business, or in the United States Court of Appeals for the District of Columbia Circuit, under the standards applicable to rulemaking proceedings under section 553 of title 5, United States Code.”. SEC. 203. ORAL ORDERS. (a) In General.— Section 4c (7 U.S.C. 6c) is amended by adding at the end the following new subsection: “(g) The Commission shall adopt rules requiring that a contemporaneous written record be made, as practicable, of all orders for execution on the floor or subject to the rules of each contract market placed by a member of the contract market who is present on the floor at the time such order is placed.”. (b) Effective Date.— The Commission shall adopt the rules required by the amendment made under subsection (a) within two hundred and seventy days after the date of enactment of this Act. SEC. 204. TELEMARKETING FRAUD. (a) In General.— Section 17(p) (7 U.S.C. 21(p)) is amended— (1) by striking “and” at the end of paragraph (2); (2) by striking the period at the end of paragraph (3) and inserting and”; and (3) by adding at the end the following new paragraph: “(4) establish special supervisory guidelines to protect the public interest relating to the solicitation by telephone of new futures or options accounts and make such guidelines applicable to those members determined to require such guidelines in accordance with standards established by the Commission consistent with this Act. Such guidelines may include a requirement that, with respect to a customer with no previous futures or commodity options trading experience, the member may not enter an order for the account of such customer for a period of three days following opening of the account and receipt of a signed acknowledgment by the customer of receipt of a risk disclosure statement.”. (b) Implementation.— The guidelines required under section 17(p)(4) of the Commodity Exchange Act (as added by subsection (a) of this section) shall be submitted by a futures association registered with the Commodity Futures Trading Commission on the date of enactment of this Act to the Commission for the approval of the Commission not later than one hundred and eighty days after the date of enactment of this Act. SEC. 205. UNDERCOVER OPERATIONS AND ENFORCEMENT. Section 8(a) of the Commodity Exchange Act (7 U.S.C. 12(a)) is amended by— (1) inserting “(1)” after “(a)”; and (2) adding at the end the following: “(2) In conducting investigations authorized under this subsection or any other provision of this Act, the Commission shall continue, as the Commission determines necessary, to request the assistance of and cooperate with the appropriate Federal agencies in the conduct of such investigations, including undercover operations by such agencies. The Commission and the Department of Justice shall assess the effectiveness of such undercover operations and, within two years of the date of enactment of the Futures Trading Practices Act of 1992, shall recommend to Congress any additional undercover or other authority for the Commission that the Commission or the Department of Justice believes to be necessary.”. SEC. 206. SELF REGULATORY ORGANIZATION DISCIPLINARY COMMITTEES AND GOVERNING BOARDS. (a) Contract Markets.— (1) Governing boards and disciplinary committees.— Subsection (a) of section 5a (7 U.S.C. 7a) (as amended by sections 201(a)(1) and 217 of this Act) is further amended by adding at the end the following new paragraphs: “(14) (A) provide for meaningful representation on the governing board of the contract market’s board of trade of a diversity of interests, including— “(i) futures commission merchants; “(ii) producers of, and consumers, processors, distributors, or merchandisers of, principal commodities traded on the board of trade; “(iii) floor brokers and traders; and “(iv) participants in a variety of pits or principal groups of commodities traded on the exchange. “(B) provide that no less than 20 percent of the regular voting members of such board be comprised of nonmembers of such contract market’s board of trade with— “(i) expertise in futures trading, or the regulation thereof, or in commodities traded through contracts on the board of trade; or “(ii) other eminent qualifications making such person capable of participating in and contributing to board deliberations. “(C) provide that no less than 10 percent of the regular voting members of such board be comprised where applicable of farmers, producers, merchants, or exporters of principal commodities traded on the exchange; “(15) (A) provide on all major disciplinary committees for a diversity of membership sufficient to ensure fairness and to prevent special treatment or preference for any person in the conduct of disciplinary proceedings and the assessment of penalties. “(B) Consistent with Commission rules, a major disciplinary committee hearing a disciplinary matter shall include— “(i) a majority of qualified persons representing a trading status other than that of the subject of the proceeding; and “(ii) where appropriate to carry out the purposes of this Act, qualified persons who are not members of the exchange. “(C) For purposes of this paragraph, a trading status on a contract market may include, consistent with Commission rules, such categories as (i) floor brokers and traders; (ii) producers, consumers, processors, distributors, or merchandisers of commodities; (iii) futures commission merchants; and (iv) members of the aforementioned categories who participate in particular contract markets or principal groups of commodities on the board of trade. “(D) If a contract market takes final disciplinary action against a member for a violation that involves the execution of a customer transaction and results in financial harm to such customer, the contract market shall promptly inform the futures commission merchant identified on the records of such contract market as having cleared such transaction, and such futures commission merchant shall promptly inform the person identified on its records as the owner of the account for which such transaction was executed, of the disciplinary action and the principal facts thereof; “(16) provide that no member found by the Commission, a contract market, a registered futures association, or a court of competent jurisdiction to have committed any violation of this Act or any other provision of law that would reflect on the fitness of the member may serve on any contract market oversight or disciplinary panel for an appropriate period (as defined by Commission rule); and”. (2) Major disciplinary rule violations.— Section 8c (7 U.S.C. 12c) is amended— (A) by redesignating subsections (1) through (4) as subsections (a) through (d); (B) in subsection (a), as so redesignated— (i) by striking “(A)” and inserting “(1)”; and (ii) by striking “(B)” and inserting “(2)”; (C) in subsection (c), as so redesignated, by striking “subsection (2)” each place it appears and inserting “subsection (b)”; (D) in subsection (d), as so redesignated, by striking “subsection (1)” and inserting “subsection (a)”; and (E) by adding at the end the following: “(e) (1) The Commission shall issue regulations requiring each contract market to establish and make available to the public a schedule of major violations of any rule within the disciplinary jurisdiction of such contract market. “(2) The regulations issued by the Commission pursuant to this subsection shall prohibit, for a period of time to be determined by the Commission, any individual who is found to have committed any major violation from service on the governing board of any contract market or registered futures association, or on any disciplinary committee thereof.” (b) Registered Futures Associations.— (1) Governing boards and disciplinary committees.— Section 17(b) (7 U.S.C. 21(b)) is amended— (A) in subparagraphs (A) and (B) of paragraph (3) by striking “or” at the end; (B) in paragraphs (3)(D), (4)(A), (4)(B), (4)(C), (4)(D), (4)(F), (5), (6), (7), (8), (9), (9)(A), (9)(B), and (9)(D) by striking the period at the end and inserting a semicolon; (C) in paragraphs (4)(E), (9)(C), and (10) by striking the period at the end and inserting “; and”; and . (D) by adding at the end the following new paragraphs: “(11) such association provides for meaningful representation on the governing board of such association of a diversity of membership interests and provides that no less than 20 percent of the regular voting members of such board be comprised of qualified nonmembers of or persons who are not regulated by such association. “(12) (A) such association provides on all major disciplinary committees for a diversity of membership sufficient to ensure fairness and to prevent special treatment or preference for any person in the conduct of disciplinary proceedings and the assessment of penalties. “(13) heading>A major disciplinary committee hearing a disciplinary matter shall include— “(A) qualified persons representing segments of the association membership other than that of the subject of the proceeding; and “(B) where appropriate to carry out the purposes of this paragraph, qualified persons who are not members of the association.”. (2) Major disciplinary rule violations.— Section 17 (7 U.S.C. 21), as amended by section 204, is amended by inserting after subsection (p) the following: “(q) (1) The Commission shall issue regulations requiring each registered futures association to establish and make available to the public a schedule of major violations of any rule within the disciplinary jurisdiction of such registered futures association. “(2) The regulations issued by the Commission pursuant to this subsection shall prohibit, for a period of time to be determined by the Commission, any member of a registered futures association who is found to have committed any major violation from service on the governing board of any registered futures association or contract market, or on any disciplinary committee thereof.” (c) Implementation.— Not later than two hundred and seventy 7 USC 7a note. days after the date of enactment of this Act, the Commodity Futures Trading Commission shall adopt such rules as are necessary to carry out the amendments made by subsections (a) and (b), including rules that— (1) specify membership categories that shall be represented on disciplinary panels; (2) define major disciplinary committee” for purposes of sections 5a(a)(15) and 17(b)(12) of the Commodity Exchange Act (as added by subsections (a) and (b), respectively); and (3) specify the conditions under which such panels shall include qualified persons who are not members of the exchange or association, which shall include at a minimum— (A) any disciplinary action where the subject of such action is a member of the contract market or association governing board or of any major disciplinary committee of such contract market or association; and (B) any disciplinary action based on facts related to a claim that the subject of such action manipulated or attempted to manipulate the price of a commodity or future or option. SEC. 207. REQUIRED REGISTRATION OF FLOOR TRADERS. (a) Requirement.— Section 4e (7 U.S.C. 6e) is amended to read as follows: “Sec. 4e. It shall be unlawful for any person to act as floor trader in executing purchases and sales, or as floor broker in executing any orders for the purchase or sale, of any commodity for future delivery, or involving any contracts of sale of any commodity for future delivery, on or subject to the rules of any contract market unless such person shall have registered, under this Act, with the Commission as such floor trader or floor broker and such registration shall not have expired nor been suspended nor revoked. (b) Conforming Amendments.— The Act is amended— (1) in sections 4f(1), 4g(1), and 6d(1) (7 U.S.C. 6f(1), 6g(1), 13a–2(1)), by striking “or floor broker” and inserting “floor broker, or floor trader; (2) in section 6d(8)(A) (7 U.S.C. 13a–2(8)(A)), by inserting “, floor trader,” after “floor broker”; (3) in section 8a(1), (7 U.S.C. 12a(1)), by striking “and floor brokers” and inserting “floor brokers, and floor traders”; and (4) in sections 8a(2)(C)(i), 8a(2)(D)(ii), and 8a(3)(E)(ii) (7 U.S.C. 12a(2)(C)(i), 12a(2)(D)(ii), and 12a(3)(E)(ii)), by inserting “floor trader,” after “floor broker,”. (c) Regulations.— The amendments made by this section shall become effective one hundred and eighty days after the date of enactment of this Act, and the Commodity Futures Trading Commission shall issue any regulations necessary to implement the amendments made by this section no later than one hundred and eighty days after the date of enactment of this Act. SEC. 208. ENHANCEMENT OF REGISTRATION REQUIREMENTS. (a) Injunctions.— Section 8a(2)(C)(ii) (7 U.S.C. 12a(2)(C)(ii)) is amended to read as follows: “(ii) engaging in or continuing any activity where such activity involves embezzlement, theft, extortion, fraud, fraudulent conversion, misappropriation of funds, securities or property, forgery, counterfeiting, false pretenses, bribery, gambling, or any transaction in or advice concerning contracts of sale of a commodity for future delivery, concerning matters subject to Commission regulation under section 4c or 19, or concerning securities”. (b) Certain Violations of Law.— Section 8a(2)(D)(iv) (7 U.S.C. 12a(2)(D(iv)) is amended by— (1) inserting “1001,” after “152,”; (2) striking “or” after “1342,”; (3) inserting “1503, 1623, 1961, 1962, 1963, or 2314,” after “1343,”; and (4) inserting “, or section 7201 or 7206 of the Internal Revenue Code of 1986” after “Code”. (c) Other Violations of Law.— Section 8a(2)(E) (7 U.S.C. 12a(2)(E)) is amended— (1) by striking “by any court of competent jurisdiction,” and inserting “in a proceeding brought”; and (2) in clause (i) by inserting “chapter 96 of title 18 of the United States Code,” after “1977,”. (d) Registration Revocation Based on Inaccurate Statements.— Section 8a(2)(G) (7 U.S.C. 12a(2)(G)) is amended by— (1) striking “subparagraphs (A) through (F) of this paragraph,” and inserting “this paragraph and paragraph (3),”; (2) striking “material” the first place it appears and inserting “materially”; and (3) striking “application” and inserting “application or any update thereto”. (e) General Felony Convictions.— Section 8a(3)(D) (7 U.S.C. 12a(3)(D)) is amended by— (1) inserting “pleaded guilty to or” after “person”; (2) inserting a comma after “section” the first place it appears; (3) striking “within ten years preceding the filing of the application or at any time thereafter,”; (4) striking “, including a felony”; and (5) striking “, more than” and inserting “more than”. (f) Special Felony Convictions.— Section 8a(3)(E) (7 U.S.C. 12a(3)(E)) is amended— (1) by inserting “pleaded guilty to or” after “person”; (2) by striking “within ten years preceding the filing of the application for registration or at any time thereafter”; and (3) in clause (iv) by inserting “, or section 7203, 7204, 7205, or 7207 of the Internal Revenue Code of 1986” after “Code”. (g) Registration Denied or Conditioned Based on Inaccurate Statements.— Section 8a(3)(G) (7 U.S.C. 12a(3)(G)) is amended by— (1) striking “material” the first place it appears and inserting “materially”; (2) striking the comma after “application”; (3) inserting “or any update thereto,” after “application”; (4) striking “thereunder, or” and inserting “thereunder,”; and (5) inserting “or in any registration disqualification proceeding” after “Commission”. (h) Non-Federal Criminal Conduct.— Section 8a(3)(H) (7 U.S.C. 12a(3)(H)) is amended by inserting “, in a United States military court,” after “State court”. (i) Existing Restrictions on Memberships.— Section 8a(3)(J) (7 U.S.C. 12a(3)(J)) is amended by— (1) striking “or” after “association,” the first place it appears; (2) inserting “or any foreign regulatory body that the Commission recognizes as having a comparable regulatory program” after “organization,” the first place it appears; (3) striking “or” after “association,” the second place it appears; and (4) striking “organization;” and inserting “organization, or foreign regulatory body;”. SEC. 209. ENFORCEMENT OF CIVIL MONEY PENALTIES. (a) Money Penalties.— Section 6 (7 U.S.C. 8 et seq.) is amended— (1) by redesignating subsections (a) through (d) as subsections (b) through (e), respectively; (2) by inserting “(a)” after “Sec. 6”; (3) in subsection (a), as so redesignated, by striking “paragraph (a)” and inserting “subsection (b)”; (4) in subsection (d), as so redesignated— (A) by striking “paragraph (b) of this section” and inserting “subsection (c)”; and (B) by striking “section 6(b) of this Act” and inserting “subsection (c)”; and (5) by amending subsection (e), as so redesignated, to read as follows: “(e) (1) In determining the amount of the money penalty assessed under subsection (c), the Commission shall consider the appropriateness of such penalty to the gravity of the violation. “(2) Unless the person against whom a money penalty is assessed under subsection (c) shows to the satisfaction of the Commission within fifteen days from the expiration of the period allowed for payment of such penalty that either an appeal as authorized by subsection (c) has been taken or payment of the full amount of the penalty then due has been made, at the end of such fifteen-day period and until such person shows to the satisfaction of the Commission that payment of such amount with interest thereon to date of payment has been made— “(A) such person shall be prohibited automatically from trading on all contract markets; and “(B) if such person is registered with the Commission, such registration shall be suspended automatically. “(3) If a person against whom a money penalty is assessed under subsection (c) takes an appeal and if the Commission prevails or the appeal is dismissed, unless such person shows to the satisfaction of the Commission that payment of the full amount of the penalty then due has been made by the end of thirty days from the date of entry of judgment on the appeal— “(A) such person shall be prohibited automatically from trading on all contract markets; and “(B) if such person is registered with the Commission, such registration shall be suspended automatically. If the person against whom the money penalty is assessed fails to pay such penalty after the lapse of the period allowed for appeal or after the affirmance of such penalty, the Commission may refer the matter to the Attorney General who shall recover such penalty by action in the appropriate United States district court.”. (b) Conforming Amendments.— The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended— (1) in section 2(a)(1)(B)(iv)— (A) in subclause (I) by striking “section 6(b)” and inserting “section 6(c)”; and (B) in subclause (II) by striking “section 6(a)” and inserting “section 6(b)”; (2) in section 5(6), as so redesignated by section 201(c)(2), by striking “paragraph (b) of section 6” and inserting “section 6(c)”; (3) in section 5b by striking “paragraph (a) of section 6” 7 USC 7b. and inserting “section 6(b)”; (4) in section 6a(1) by striking “paragraph (a) of section 7 USC 10a. 6” and inserting “section 6(b)”; (5) in section 6b by striking “paragraph (a) of section 6” 7 USC 13a. and inserting “section 6(b)”; (6) in section 8a— 7 USC 12a. (A) in the first proviso to paragraph (2) by striking “section 6(b)” and inserting “section 6(c)”; (B) in the second proviso to paragraph (3) by striking “section 6(b)” and inserting “section 6(c)”; and (C) in paragraph (4) by striking “section 6(b)” each place it appears and inserting “section 6(c)”; (7) in section 14(e) by striking “paragraph (b) of section 7 USC 18. 6” and inserting “section 6(c)”; and (8) in section 17— 7 USC 21. (A) in subsection (b)— (i) in paragraph (3)(B) by striking “section 6(b)” and inserting “section 6(c)”; and (ii) in paragraph (4)(F) by striking “subsection (b)” of section and inserting “section 6(c)”; (B) in subsection (i)(4) by striking “section 6(b)” and inserting “section 6(c)”; and (C) in subsection (o)(4) by striking “section 6(b)” and inserting “section 6(c)”. SEC. 210. ETHICS TRAINING FOR REGISTRANTS. (a) Mandatory Training for Registrants.— Section 4p (7 U.S.C. 6p) is amended by— (1) inserting “(a)” after “Sec. 4p.”; and (2) adding at the end the following: “(b) The Commission shall issue regulations to require new registrants, within six months after receiving such registration, to attend a training session, and all other registrants to attend periodic training sessions, to ensure that registrants understand their responsibilities to the public under this Act, including responsibilities to observe just and equitable principles of trade, any rule or regulation of the Commission, any rule of any appropriate contract market, registered futures association, or other self-regulatory organization, or any other applicable Federal or state law, rule or regulation.”. (b) Regulations.— The Commodity Futures Trading Commission 7 USC 6p note. shall issue the regulations required by section 4p(b) of the Commodity Exchange Act, as added by subsection (a), no later than one hundred and eighty days after the date of enactment of this Act. SEC. 211. NATIONWIDE SERVICE OF PROCESS AND VENUE. Section 22(c) (7 U.S.C. 25(c)) is amended to read as follows: “(c) The United States district courts shall have exclusive jurisdiction Courts. of actions brought under this section. Any such action shall be brought not later than two years after the date the cause of action arises. Any action brought under subsection (a) of this section may be brought in any judicial district wherein the defendant is found, resides, or transacts business, or in the judicial district wherein any act or transaction constituting the violation occurs. Process in such action may be served in any judicial district of which the defendant is an inhabitant or wherever the defendant may be found.”. SEC. 212. INCREASED PENALTIES. (a) Felony Violations.— Section 9 (7 U.S.C. 13) is amended— (1) by— (A) striking subsections (a), (b), and (c); (B) redesignating subsections (d) and (e) as subsections (c) and (d), respectively; and (C) inserting before subsection (c), as redesignated, the following new subsections: “(a) It shall be a felony punishable by a fine of not more than $1,000,000 (or $500,000 in the case of a person who is an individual) or imprisonment for not more than five years, or both, together with the costs of prosecution, for: “(1) Any person registered or required to be registered under this Act, or any employee or agent thereof, to embezzle, steal, purloin, or with criminal intent convert to such person’s use or to the use of another, any money, securities, or property having a value in excess of $100, which was received by such person or any employee or agent thereof to margin, guarantee, or secure the trades or contracts of any customer or accruing to such customer as a result of such trades or contracts or which otherwise was received from any customer, client, or pool participant in connection with the business of such person. The word ‘value’ as used in this paragraph means face, par, or market value, or cost price, either wholesale or retail, whichever is greater. “(2) Any person to manipulate or attempt to manipulate the price of any commodity in interstate commerce, or for future delivery on or subject to the rules of any contract market, or to comer or attempt to comer any such commodity or knowingly to deliver or cause to be delivered for transmission through the mails or interstate commerce by telegraph, telephone, wireless, or other means of communication false or misleading or knowingly inaccurate reports concerning crop or market information or conditions that affect or tend to affect the price of any commodity in interstate commerce, or knowingly to violate the provisions of section 4, section 4b, sub-sections (a) through (e) of subsection 4c, section 4h, section 4o(l), or section 19. “(3) Any person knowingly to make, or cause to be made, any statement in any application, report, or document required to be filed under this Act or any rule or regulation thereunder or any undertaking contained in a registration statement required under this Act, or by any contract market or registered futures association in connection with an application for membership or participation therein or to become associated with a member thereof, which statement was false or misleading with respect to any material fact, or knowingly to omit any material fact required to be stated therein or necessary to make the statements therein not misleading. “(4) Any person willfully to falsify, conceal, or cover up by any trick, scheme, or artifice a material fact, make any false, fictitious, or fraudulent statements or representations, or make or use any false writing or document knowing the same to contain any false, fictitious, or fraudulent statement or entry to a contract market, board of trade, or futures association designated or registered under this Act acting in furtherance of its official duties under this Act. “(5) Any person willfully to violate any other provision of this Act, or any rule or regulation thereunder, the violation of which is made unlawful or the observance of which is required under the terms of this Act, but no person shall be subject to imprisonment under this paragraph for the violation of any rule or regulation if such person proves that he had no knowledge of such rule or regulation. “(b) Any person convicted of a felony under this section shall be suspended from registration under this Act and shall be denied registration or reregistration for five years or such longer period as the Commission may determine, and barred from using, or participating in any manner in, any market regulated by the Commission for five years or such longer period as the Commission shall determine, on such terms and conditions as the Commission may prescribe, unless the Commission determines that the imposition of such suspension, denial of registration or reregistration, or market bar is not required to protect the public interest. The Commission may upon petition later review such disqualification and market bar and for good cause shown reduce the period thereof.”; (2) in subsection (c) (as redesignated by paragraph (1) of this section) by striking “$100,000” and inserting “$500,000”; and (3) in subsection (d) (as redesignated by paragraph (1) of this section) by striking “$100,000” and inserting “$500,000”. (b) Other Violations.— Section 6(c) and 6(d) (7 U.S.C. 9 and 13b), as such subsections are redesignated by section 209, are each amended by striking “$100,000” each place it appears and inserting “the higher of $100,000 or triple the monetary gain to such person”. (c) Nonenforcement of Rules of Government or Other Violations.— Section 6b (7 U.S.C. 13a) is amended— (1) by striking “$100,000” each place it appears and inserting “$500,000”; and (2) in the last sentence, by striking “the appropriateness of such penalty to the net worth of the offending person and”. SEC. 213. CONTRACT MARKET EMERGENCY ACTIONS. (a) Prior Commission Notification Required.— Section 5a(a)(12) (7 U.S.C. 7a(12)), as redesignated by section 201, is amended— (1) by striking “(12) except” and inserting “(12)(A) except”; and (2) by striking the last two sentences of paragraph (12)(A) as so redesignated, and inserting the following: “(B) (i) The Commission shall issue regulations to specify the terms and conditions under which, in an emergency as defined by the Commission, a contract market may, by a two-thirds vote of its governing board, make a rule (hereinafter referred to as an emergency rule’) effective on a temporary basis without prior Commission approval, or without compliance with the ten-day notice requirement under subparagraph (A), or during any period of review by the Commission, if the contract market makes every effort practicable to notify the Commission of such emergency rule, along with a complete explanation of the emergency involved, prior to making the emergency rule effective. If the contract market does not provide the Commission with such notification and explanation before making the emergency rule effective, the contract market shall provide the Commission with such notification and explanation at the earliest possible date. The Commission may delegate the power to receive such notification and explanation to such individuals as the Commission determines necessary and appropriate. “(ii) Within ten days of the receipt from a contract market of notification of such an emergency rule and an explanation of the emergency involved, or as soon as practicable, the Commission shall determine whether it is appropriate either— “(I) to permit such rule to remain in effect during the pendency of the emergency, or “(II) to suspend the effect of such rule pending review either under the procedures of subparagraph (A) or otherwise. Reports. The Commission shall submit a report on its determination and the basis thereof with respect to such emergency rule to the affected contract market, to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate. If the report is submitted more than ten days after the Commission’s receipt of notification of such an emergency rule from a contract market, the report shall explain why submission within such ten-day period was not practicable. A determination by the Commission to suspend the effect of a rule under this subparagraph shall be subject to judicial review on the same basis as an emergency determination under section 8a(9). Nothing in this paragraph shall be construed to limit the authority of the Commission under section 8a(9);”. (b) Regulations.— The Commodity Futures Trading Commission shall issue regulations to implement section 5a(12)(B) of the Commodity Exchange Act, as added by subsection (a), no later than one hundred and eighty days after the date of enactment of this Act. Until the effective date of such regulations, any regulation of the Commission that implements the last two sentences of section 5a(12), as such sentences were in effect immediately before the date of enactment of this Act, shall remain in effect. SEC. 214. PROHIBITION AGAINST INSIDER TRADING. (a) In General.— Section 9 (7 U.S.C. 13) is amended by adding at the end the following: “(f) It shall be a felony for any person— “(1) who is an employee, member of the governing board, or member of any committee of a board of trade, contract market, or registered futures association, in violation of a regulation issued by the Commission, willfully and knowingly to trade for such person’s own account, or for or on behalf of any other account, in contracts for future delivery or options thereon on the basis of, or willfully and knowingly to disclose for any purpose inconsistent with the performance of such persons official duties as an employee or member, any material nonpublic information obtained through special access related to the performance of such duties. (2) willfully and knowingly to trade for such person’s own account, or for or on behalf of any other account, in contracts for future delivery or options thereon on the basis of any material nonpublic information that such person knows was obtained in violation of paragraph (1) from an employee, member of the governing board, or member of any committee of a board of trade, contract market, or registered futures association. Such felony shall be punishable by a fine of not more than $500,000, plus the amount of any profits realized from such trading or disclosure made in violation of this subsection, or imprisonment for not more than five years, or both, together with the costs of prosecution”. (b) Regulations.— The Commodity Futures Trading Commission 7 USC 13 note. shall issue regulations to implement the amendment made by subsection (a) not later than three hundred and sixty days after the date of enactment of this Act. SEC. 215. QUALIFICATIONS OF COMMISSIONERS. Section 2(a)(2)(A) (7 U.S.C. 4a(a)(1)) is amended by striking the second and third sentences and inserting the following: “The President. Commission shall be composed of five 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— “(i) select persons who shall each have demonstrated knowledge in futures trading or its regulation, or 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; and “(ii) seek to ensure that the demonstrated knowledge of the Commissioners is balanced with respect to such areas.”. SEC. 216. COMMISSION OPERATIONS. Section 12(b) (7 U.S.C. 16(b)) is amended— (1) by designating the first through third sentences as paragraphs (1) through (3), respectively, and (2) by adding at the end the following new paragraph: “(4) The Commission may request (in accordance with the procedures set forth in subchapter II of chapter 31 of title 5, United States Code) and the Office of Personnel Management shall authorize pursuant to the request, eight positions in the Senior Executive Service in addition to the number of such positions authorized for the Commission on the date of enactment of this sentence.”. SEC. 217. PROHIBITION ON VOTING BY INTERESTED MEMBERS. Subsection (a) of section 5a (7 U.S.C. 7a) (as amended by sections 201(a) and 206(a)(l) of this Act) is further amended by adding at the end the following: “(17) (A) provide for the avoidance of conflict of interest in deliberations by the governing board and any disciplinary and oversight committees. In order to comply with this subparagraph, each contract market shall adopt rules and procedures to require, at a minimum, that “(i) any member of a governing board or a disciplinary or other oversight committee must abstain from confidential deliberations and voting on any matter where the named party in interest is the member, the member’s employer, the member’s employee, or any other person that has a business, employment, or family relationship with the member that warrants abstention by the member; “(ii) any member of a governing board or a disciplinary or other oversight committee must abstain from voting on any significant action that would not be submitted to the Commission for its prior approval, if, as determined in accordance with regulations promulgated by the Commission, the member knowingly has a direct and substantial financial interest in the result of the vote, based either on positions held personally or at an affiliated firm; “(iii) prior to the deliberations of the governing board, disciplinary board, or other oversight committee, acting directly or indirectly through an authorized member or contract market official, the positions of the members of such board or committee, and positions of the firm or firms with which such members are affiliated, are reviewed: Provided, however, That no contract market or official, employee, member, other than the member whose position or positions are being reviewed, or agent thereof shall be subject to liability, except for liability in an action initiated by the Commission, for having conducted this review and for having taken or not taken further action; and “(iv) the board or committee shall clearly reflect, in the minutes of such meeting, that the review required in clause (iii) occurred and any decisions by a member to abstain or by the board or committee whether to direct a member or members to abstain from deliberations or voting on the matter before the board or committee. Any member prohibited from voting on a rule pursuant to this paragraph shall not be included in determining whether there has been a two-thirds vote of members of the governing board or committee as required by subparagraph (12). “(B) For the purposes of this paragraph, the term ‘significant action that would not be submitted to the Commission for its prior approval’ includes— “(i) any nonphysical emergency rule; or “(ii) any changes in margin levels designed to respond to extraordinary market conditions that are likely to have a substantial affect on prices in any contract traded on such contract market, but does not include any rule not submitted for prior Commission approval because such rule is unrelated to terms and conditions of any contract traded on such contract market. “(C) Notwithstanding the provisions of subparagraph (A)(ii), the Commission shall issue rules establishing the conditions under which a member of a board or committee who is required to abstain from voting on a significant action, as provided in subparagraph (A)(ii), may participate in deliberations on that action prior to such vote, where the member’s participation is consistent with the public interest.”. SEC. 218. STUDY OF ASSESSMENTS ON TRANSACTIONS. (a) Study.— The Comptroller General of the United States shall conduct a study to determine whether— (1) it is feasible to fund some or all of the enforcement and market surveillance activities of the Commodity Futures Trading Commission, as required by the amendments to the Commodity Exchange Act made by the Futures Trading Practices Act of 1992, through the imposition of an assessment on commodity futures and options transactions executed pursuant to the Commodity Exchange Act; and (2) a program of assessment-based funding for some or all of such enforcement and market surveillance activities would better provide resources to the Commodity Futures Trading Commission to enable the Commission to— (A) protect the interests of market users (including hedgers and speculators), producers of commodities traded on the futures markets, and the general public; and (B) maintain and enhance the credibility of such futures and options markets. (b) Report.— Not later than one year after the date of enactment of this Act, the Comptroller General shall submit to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate a report containing the Comptroller General’s determinations pursuant to subsection (a), together with any appropriate recommendations for the implementation of such a program of assessment-based funding for some or all of the Commodity Futures Trading Commission’s enforcement and market surveillance activities. SEC. 219. COMPETITIVENESS STUDY. (a) In General.— No later than eighteen months following the enactment of this Act, the Commodity Futures Trading Commission shall study the competitiveness of boards of trade over which it has jurisdiction compared with the boards of trade (or their foreign equivalent) over which foreign futures authorities, as defined in section 2(a)(1)(A) of the Commodity Exchange Act (7 U.S.C. 2(a)(l)(A)), have jurisdiction, and submit to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate a report of its findings with respect to— (1) the overall competitive status of United States boards of trade in the world market; (2) a comparison of applicable statutes, rules, or regulations as they relate to futures and options administered and enforced by the Commission and those administered and enforced by foreign futures authorities; (3) any trends in, or movements of, volume of futures and options trading to or from United States boards of trade during the period of the study, and whether such trends or movements, if any, were the result of the adoption of statutes, regulations, or other enforcement mechanisms in foreign countries or the United States, as opposed to other competitive, economic, regional, or commercial factors; (4) any significant harms or risks to the public interest, market users, traders, and commerce in relation to futures or options traded on such foreign boards of trade which may result from the absence of statutes, regulations, or other enforcement mechanisms in foreign countries or the United States or disparities in regulatory protections offered by United States and foreign authorities; and (5) any recommendations the Commission may have as a result of the study to enhance the competitive status of United States boards of trade in the world market, or to enhance the regulations of markets in the global environment, that will not impair customer confidence in United States boards of trade. (b) Cooperation.— To promote the efficient use of resources, the Commission shall endeavor, as it determines appropriate, to obtain the assistance of the General Accounting Office, the Office of the United States Trade Representative, or other appropriate offices of the Federal Government in order to obtain information with regard to trading at foreign boards of trade and the regulation of such boards of trade by foreign futures authorities. SEC. 220. COMPUTERIZED FUTURES TRADING. (a) International Competitiveness of Electronic Trading Systems.— Section 12 (7 U.S.C. 16) (as amended by section 303 of this Act) is further amended by adding at the end the following new subsection: “(g) Consistent with its responsibilities under section 18, the Commission is directed to facilitate the development and operation of computerized trading as an adjunct to the open outcry auction system. The Commission is further directed to cooperate with the Office of the United States Trade Representative, the Department of the Treasury, the Department of Commerce, and the Department of State in order to remove any trade barriers that may be imposed by a foreign nation on the international use of electronic trading systems.”. (b) Study.— The Commodity Futures Trading Commission shall conduct a study to assess— (1) the progress made under initiatives to conduct trading in futures and options subject to the jurisdiction of the Commission under the Commodity Exchange Act through systems of computers or by other electronic means; and (2) whether the experience with such systems of trading indicates that they may be useful or effective to enhance access to the futures and options markets by potential market participants, improve the ability of the Commission to audit the activities of the futures and options markets, reduce the opportunity for trading abuses, and otherwise be in the public interest or raise other related issues. (c) Report.— Not later than two years after the date of enactment of this Act, the Commission shall submit to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate a report containing the results of the study conducted under subsection (a), together with any appropriate recommendations. SEC. 221. MONEY PENALTIES IN CIVIL COURT ACTIONS. Section 6c (7 U.S.C. 13c) is amended— (1) by designating the first, second, third, fourth, fifth, and sixth sentences as subsections (a), (b), (c), (e), (f), and (g), respectively; and (2) by inserting after subsection (c) (as so designated) the following new subsection: “(d) (1) In any action brought under this section, the Commission may seek and the court shall have jurisdiction to impose, on a proper showing, on any person found in the action to have committed any violation a civil penalty in the amount of not more than the higher of $100,000 or triple the monetary gain to the person for each violation. “(2) If a person on whom such a penalty is imposed fails to pay the penalty within the time prescribed in the court’s order, the Commission may refer the matter to the Attorney General who shall recover the penalty by action in the appropriate United States district court.”. SEC. 222. CIVIL DAMAGES; LIABILITY OF FUTURES COMMISSION MERCHANTS. (a) Duties of Contract Markets.— Subsection (a)(11) of section 5a (7 U.S.C. 7a) (as amended by section 201(a)(1) of this Act) is further amended— (1) by striking “(i)” and inserting “(A)”; (2) by striking “voluntary and (ii)” and inserting “voluntary, (B)”; and (3) by inserting after the word “market” the following: “, and (C) in the case of a claim arising from a violation in the execution of an order on the floor of a contract market, such procedure shall provide, to the extent appropriate— “(i) for payment of actual damages proximately caused by such violation. If an award of actual damages is made against a floor broker in connection with the execution of a customer order, and the futures commission merchant which selected the floor broker for the execution of the customer order is held to be responsible under section 2(a)(1) for the floor broker’s violation, such futures commission merchant may be required to satisfy such award; and “(ii) where the violation is willful and intentional, for payment to the customer of punitive or exemplary damages, in addition to losses proximately caused by the violation, in an amount equal to no more than two times the amount of such losses. If punitive or exemplary damages are awarded against a floor broker in connection with the execution of a customer order, and the futures commission merchant which selected the floor broker for the execution of such order is held to be responsible under section 2(a)(1) for the floor broker’s violation, such futures commission merchant may be required to satisfy the award of punitive or exemplary damages if the floor broker fails to do so, except that such requirement shall apply to the futures commission merchant only if it willfully and intentionally selected the floor broker with the intent to assist or facilitate the floor broker’s violation;”. (b) Complaints Against Registered Persons.— Section 14(a) (7 U.S.C. 18(a)) is amended by striking “awarding actual damages proximately caused by such violation.” and inserting “ awarding— “(1) actual damages proximately caused by such violation. If an award of actual damages is made against a floor broker in connection with the execution of a customer order, and the futures commission merchant which selected the floor broker for the execution of the customer order is held to be responsible under section 2(a)(1) for the floor broker’s violation, such futures commission merchant may be required to satisfy such award; and “(2) in the case of any action arising from a willful and intentional violation in the execution of an order on the floor of a contract market, punitive or exemplary damages equal to no more than two times the amount of such actual damages. If an award of punitive or exemplary damages is made against a floor broker in connection with the execution of a customer order, and the futures commission merchant which selected the floor broker for the execution of the customer order is held to be responsible under section 2(a)(1) for the floor broker’s violation, such futures commission merchant may be required to satisfy such award if the floor broker fails to do so, except that such requirement shall apply to the futures commission merchant only if it willfully and intentionally selected the floor broker with the intent to assist or facilitate the floor broker’s violation.”. (c) Registered Futures Associations.— Section 17(b)(10) (7 U.S.C. 21(b)(10)) (as amended by section 206(b)(1) of this Act) is further amended— (1) by striking “(i)” and inserting “(A)”; (2) by striking “voluntary and (ii)” and inserting “voluntary, (B)”; and (3) by inserting after the word “association” the following: “, and (C) in the case of a claim arising from a violation in the execution of an order on the floor of a contract market, such procedure shall provide, to the extent appropriate— “(i) for payment of actual damages proximately caused by such violation. If an award of actual damages is made against a floor broker in connection with the execution of a customer order, and the futures commission merchant which selected the floor broker for the execution of the customer order is held to be responsible under section 2(a)(1) for the floor broker’s violation, such futures commission merchant may be required to satisfy such award; and “(ii) where the violation is willful and intentional, for payment to the customer of punitive or exemplary damages, in addition to losses proximately caused by the violation, in an amount equal to no more than two times the amount of such losses. If punitive or exemplary damages are awarded against a floor broker in connection with the execution of a customer order, and the futures commission merchant which selected the floor broker for the execution of such order is held to be responsible under section 2(a)(1) for the floor broker’s violation, such futures commission merchant may be required to satisfy the award of punitive or exemplary damages if the floor broker fails to do so, except that such requirement shall apply to the futures commission merchant only if it willfully and intentionally selected the floor broker with the intent to assist or facilitate the floor broker’s violation”. (d) Private Rights of Action.— Section 22(a) (7 U.S.C. 25(a)) is amended by adding at the end the following new paragraph: “(3) In any action arising from a violation in the execution of an order on the floor of a contract market, the person referred to in paragraph (1) shall be liable for— “(A) actual damages proximately caused by such violation. If an award of actual damages is made against a floor broker in connection with the execution of a customer order, and the futures commission merchant which selected the floor broker for the execution of the customer order is held to be responsible under section 2(a)(1) for the floor broker’s violation, such futures commission merchant may be required to satisfy such award; and “(B) where the violation is willful and intentional, punitive or exemplary damages equal to no more than two times the amount of such actual damages. If an award of punitive or exemplary damages is made against a floor broker in connection with the execution of a customer order, and the futures commission merchant which selected the floor broker for the execution of the customer order is held to be responsible under section 2(a)(1) for the floor broker’s violation, such futures commission merchant may be required to satisfy such award if the floor broker fails to do so, except that such requirement shall apply to the futures commission merchant only if it willfully and intentionally selected the floor broker with the intent to assist or facilitate the floor broker’s violation.#x201D;. SEC. 223. CUSTOMER RESTITUTION. The tenth sentence of section 6(c) (7 U.S.C. 9) (as redesignated by section 209(a)(1) of this Act) is amended— (1) by inserting “(1)” after “may” the first place it appears; (2) by striking “and, if” and inserting “(2) if”; (3) by striking “may suspend” and inserting “suspend”; (4) by striking “and may” and inserting “(3)”; and (5) by inserting before the period the following: “and (4) require restitution to customers of damages proximately caused by violations of such persons”. SEC. 224. COMPLAINTS AGAINST REGISTERED PERSONS; CLASS ACTION SUITS. Section 14(a) (7 U.S.C. 18(a)) (as amended by section 222(b) of this Act) is further amended— (1) by redesignating paragraphs (1) and (2) as subparagraphs (A) and (B), respectively; (2) by inserting “(1)” after the subsection designation; and (3) by adding at the end the following new paragraph: “(2) (A) An action may be brought under this subsection by any one or more persons described in this subsection for and in behalf of such person or persons and other persons similarly situated, if the Commission permits such actions pursuant to a final rule issued by the Commission. “(B) Not later than two hundred and seventy days after the date of enactment of this paragraph, the Commission shall propose and publish for public comment such rules as are necessary to carry out subparagraph (A). In developing such rules, the Commission shall consider the potential impact of such actions on resources available to the reparations system established under this Act and the relative merits of bringing such actions in Federal court.”. SEC. 225. PENALTIES STUDY AND GUIDELINES. (a) Study.— The Commodity Futures Trading Commission shall study the penalties the Commission imposes against persons found to have violated the Commodity Exchange Act (7 U.S.C. 1 et seq.) and the penalties imposed by contract markets and registered futures associations against persons found to have violated their respective rules established under such Act. (b) Report.— Not later than two years after the date of enactment of this Act, the Commission shall submit to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate a report that describes the results of the study conducted under subsection (a). The report shall— (1) include an analysis of whether systematic differences exist among penalties imposed by various contract markets and registered futures associations for similar offenses, and, if so, the causes of such differences; (2) propose industry-wide guidelines or rules to make penalty levels among contract markets and registered futures associations consistent, including, if appropriate, minimum penalties or penalty ranges for various offenses; and (3) propose guidelines or rules to make Commission penalty levels consistent, including, if appropriate, minimum penalties or penalty ranges for various offenses. SEC. 226. PUBLICATION OF COMMISSION OPINIONS. Section 2(a)(9) (7 U.S.C. 4a(h)) is amended by adding at the end the following new subparagraph: “(C) Whenever the Commission issues for official publication any opinion, release, rule, order, interpretation, or other determination on a matter, the Commission shall provide that any dissenting, concurring, or separate opinion by any Commissioner on the matter be published in full along with the Commission opinion, release, rule, order, interpretation, or determination.” SEC. 227. SUSPENSION OF REGISTRANTS CHARGED WITH FELONIES. Section 8a (7 U.S.C. 12a) is amended— (1) by striking “and” at the end of paragraph (9); (2) by striking the period at the end of paragraph (10) and inserting “; and”; and (3) by adding at the end the following new paragraph: “(11) (A) by written notice served on the person and pursuant to such rules, regulations, and orders as the Commission may adopt, to suspend or modify the registration of any person registered under this Act who is charged (in any information, indictment, or complaint authorized by a United States attorney or an appropriate official of any State) with the commission of or participation in a crime involving a violation of this Act, or a violation of any other provision of Federal or State law that would reflect on the honesty or the fitness of the person to act as a fiduciary (including an offense specified in subparagraph (D) or (E) of paragraph (2)) that is punishable by imprisonment for a term exceeding one year, if the Commission determines that continued registration of the person may pose a threat to the public interest or may threaten to impair public confidence in any market regulated by the Commission. “(B) Prior to the suspension or modification of the registration of a person under this paragraph, the person shall be afforded an opportunity for a hearing at which the Commission shall have the burden of showing that the continued registration of the person does, or is likely to, pose a threat to the public interest or threaten to impair public confidence in any market regulated by the Commission. “(C) Any notice of suspension or modification issued under this paragraph shall remain in effect until such information, indictment, or complaint is disposed of or until terminated by the Commission. “(D) On disposition of such information, indictment, or complaint, the Commission may issue and serve on such person an order pursuant to paragraph (2) or (4) to suspend, restrict, or revoke the registration of such person. “(E) A finding of not guilty or other disposition of the charge shall not preclude the Commission from thereafter instituting any other proceedings under this Act. “(F) A person aggrieved by an order issued under this paragraph may obtain review of such order in the same manner and on the same terms and conditions as are provided in section 6(b).”. SEC. 228. APPEALS BY REGISTERED FUTURES ASSOCIATIONS. Section 17(i)(4) (7 U.S.C. 21(i)(4)) is amended by striking “(other than a registered futures association).” SEC. 229. RISK ASSESSMENT FOR HOLDING COMPANY SYSTEMS. Section 4f (7 U.S.C. 60 (as amended by section 207(b)(1) of this Act) is further amended— (1) by redesignating paragraphs (1) and (2) as subsections (a) and (b), respectively; (2) in subsection (b) (as so redesignated), by striking “this paragraph (2)” and inserting “this subsection”; and (3) by adding at the end the following new subsection: “(c) (1) As used in this subsection: “(i) The term ‘affiliated person’ means any person directly or indirectly controlling, controlled by, or under common control with a futures commission merchant, as the Commission, by rule or regulation, may determine will effectuate the purposes of this subsection. “(ii) The term ‘Federal banking agency’ shall have the same meaning as the term ‘appropriate Federal banking agency’ in section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)). “(2) (A) Each registered futures commission merchant shall Records. obtain such information and make and keep such records as the Commission, by rule or regulation, prescribes concerning the registered futures commission merchant’s policies, procedures, or systems for monitoring and controlling financial and operational risks to it resulting from the activities of any of its affiliated persons, other than a natural person. “(B) The records required under subparagraph (A) shall describe, in the aggregate, each of the futures and other financial activities conducted by, and the customary sources of capital and funding of, those of its affiliated persons whose business activities are reasonably likely to have a material impact on the financial or operational condition of the futures commission merchant, includ-ing its adjusted net capital, its liquidity, or its ability to conduct or finance its operations. “(C) The Commission, by rule or regulation, may require summary reports of such information to be filed by the futures commission merchant with the Commission no more frequently than quarterly. “(3) (A), If, as a result of adverse market conditions or based on reports provided to the Commission pursuant to paragraph (2) or other available information, the Commission reasonably concludes that the Commission has concerns regarding the financial or operational condition of any registered futures commission merchant, the Commission may require the futures commission merchant to make reports concerning the futures and other financial activities of any of such person’s affiliated persons, other than a natural person, whose business activities are reasonably likely to have a material impact on the financial or operational condition of the futures commission merchant. “(B) The Commission, in requiring reports pursuant to this paragraph, shall specify the information required, the period for which it is required, the time and date on which the information must be furnished, and whether the information is to be furnished directly to the Commission or to a contract market or other self- regulatory organization with primary responsibility for examining the registered futures commission merchant’s financial and operational condition. “(4) (A) in developing and implementing reporting requirements pursuant to paragraph (2) with respect to affiliated persons subject to examination by or reporting requirements of a Federal banking agency, the Commission shall consult with and consider the views of each such Federal banking agency. If a Federal banking agency comments in writing on a proposed rule of the Commission under this subsection that has been published for comment, the Commission shall respond in writing to the written comment before adopting Federal Register, publication. the proposed rule. The Commission shall, at the request of the Federal banking agency, publish the comment and response in the Federal Register at the time of publishing the adopted rule. “(B) (i) Except as provided in clause (ii), a registered futures commission merchant shall be considered to have compiled with a recordkeeping or reporting requirement adopted pursuant to paragraph (2) concerning an affiliated person that is subject to examination by, or reporting requirements of, a Federal banking agency if the futures commission merchant utilizes for the recordkeeping or reporting requirement copies of reports filed by the affiliated person with the Federal banking agency pursuant to section 5211 of the Revised Statutes (12 U.S.C. 161), section 9 of the Federal Reserve Act (12 U.S.C. 321 et seq.), section 7(a) of the Federal Deposit Insurance Act (12 U.S.C. 1817(a), section 10(b) of the Home Owners’ Loan Act (12 U.S.C. 1467a(b)), or section 5 of the Bank Holding Company Act of 1956 (12 U.S.C. 1844). “(ii) The Commission may, by rule adopted pursuant to paragraph (2), require any futures commission merchant filing the reports with the Commission to obtain, maintain, or report supplemental information if the Commission makes an explicit finding that the supplemental information is necessary to inform the Commission regarding potential risks to the futures commission merchant. Prior to requiring any such supplemental information, the Commission shall first request the Federal banking agency to expand its reporting requirements to include the information. “(5) Prior to making a request pursuant to paragraph (3) for information with respect to an affiliated person that is subject to examination by or reporting requirements of a Federal banking agency, the Commission shall— “(A) notify the agency of the information required with respect to the affiliated person; and “(B) consult with the agency to determine whether the information required is available from the agency and for other purposes, unless the Commission determines that any delay resulting from the consultation would be inconsistent with ensuring the financial and operational condition of the futures commission merchant or the stability or integrity of the futures markets. “(6) Nothing in this subsection shall be construed to permit the Commission to require any futures commission merchant to obtain, maintain, or furnish any examination report of any Federal banking agency or any supervisory recommendations or analysis contained in the report. “(7) No information provided to or obtained by the Commission from any Federal banking agency pursuant to a request under paragraph (5) regarding any affiliated person that is subject to examination by or reporting requirements of a Federal banking agency may be disclosed to any other person (other than as provided in section 8 or section 8a(6)), without the prior written approval of the Federal banking agency. “(8) The Commission shall notify a Federal banking agency of any concerns of the Commission regarding significant financial or operational risks resulting from the activities of any futures commission merchant to any affiliated person thereof that is subject to examination by or reporting requirements of the Federal banking agency. “(9) The Commission, by rule, regulation, or order, may exempt any person or class of persons under such terms and conditions and for such periods as the Commission shall provide in the rule, regulation, or order, from this subsection and the rules and regulations issued under this subsection. In granting the exemption, the Commission shall consider, among other factors— “(A) whether information of the type required under this subsection is available from a supervisory agency (as defined in section 1101(7) of the Right to Financial Privacy Act of 1978 (12 U.S.C. 3401(7))), a State insurance commission or similar State agency, the Securities and Exchange Commission, or a similar foreign regulator; “(B) the primary business of any affiliated person; “(C) the nature and extent of domestic or foreign regulation of the affiliated person’s activities; “(D) the nature and extent of the registered futures commission merchant’s commodity futures and options activities; and “(E) with respect to the registered futures commission merchant and its affiliated persons, on a consolidated basis, the amount and proportion of assets devoted to, and revenues derived from activities in the United States futures markets. “(10) Information required to be provided pursuant to this subsection shall be subject to section 8. Except as specifically provided in section 8 and notwithstanding any other provision of law, the Commission shall not be compelled to disclose any information required to be reported under this subsection, or any information supplied to the Commission by any domestic or foreign regulatory agency that relates to the financial or operational condition of any affiliated person of a registered futures commission merchant. “(11) Nothing in paragraphs (1) through (10) shall be construed to supersede or to limit in any way the authority or powers of the Commission pursuant to any other provision of this Act or regulations issued under this Act.”.

20. 1992

    Futures Trading Practices Act of 1992

    Pub. L. 102–546 § 206(b)(1)(B) · 106 Stat. 3590

    Substituted · 7 U.S.C. § 21(b)(5)(9)

    Pub. L. 102–546, § 206(b)(1)(B), (C), substituted a semicolon for period at end of pars. (5) to (9) and subpars. (A), (B), and (D) of par. (9) and in par. (9)(C) substituted “; and” for period at end

    Source evidence

    Code amendment note
    Subsec. (b)(5) to (9). Pub. L. 102–546, § 206(b)(1)(B), (C), substituted a semicolon for period at end of pars. (5) to (9) and subpars. (A), (B), and (D) of par. (9) and in par. (9)(C) substituted “; and” for period at end.

    Enacted provision · exact public law section
    (B) in paragraphs (3)(D), (4)(A), (4)(B), (4)(C), (4)(D), (4)(F), (5), (6), (7), (8), (9), (9)(A), (9)(B), and (9)(D) by striking the period at the end and inserting a semicolon;

21. 1992

    Futures Trading Practices Act of 1992

    Pub. L. 102–546 title II · 106 Stat. 3590

    1. Substituted · 7 U.S.C. § 21(b)(10)

       Pub. L. 102–546, §§ 206(b)(1)(C), 222(c), substituted “(A)” for “(i)”

    2. Substituted · 7 U.S.C. § 21(b)(10)

       Pub. L. 102–546, §§ 206(b)(1)(C), 222(c), substituted “voluntary, (B)” for “voluntary and (ii)”

    3. Inserted · 7 U.S.C. § 21(b)(10)

       Pub. L. 102–546, §§ 206(b)(1)(C), 222(c), inserted “, and” and subpar. (C) after “association”

    4. Substituted · 7 U.S.C. § 21(b)(10)

       Pub. L. 102–546, §§ 206(b)(1)(C), 222(c), substituted “; and” for period at end

    Source evidence

    Code amendment note
    Subsec. (b)(10). Pub. L. 102–546, §§ 206(b)(1)(C), 222(c), substituted “(A)” for “(i)” and “voluntary, (B)” for “voluntary and (ii)”, inserted “, and” and subpar. (C) after “association”, and substituted “; and” for period at end.

    Enacted provision · exact public law
    TITLE II— ENHANCEMENT OF REGULATORY AND ENFORCEMENT ACTIVITIES SEC. 201. DUTIES OF CONTRACT MARKETS; AUDIT TRAILS. (a) In General.— Section 5a (7 U.S.C. 7a) is amended— (1) by inserting “(a)” after the section designation; and (2) by adding at the end the following new subsection: “(b) (1) Each contract market shall maintain and utilize a system to monitor trading to detect and deter violations of the contract market’s rules and regulations committed in the making of trades and the execution of customer orders on the floor or subject to the rules of such contract market. The system shall include— “(A) physical observation of trading areas; “(B) audit trail and recordkeeping systems able to capture essential data on the terms, participants, and sequence of transactions (including relevant data on unmatched trades and out-trades); “(C) systems capable of reviewing, and used to review, data on trades effectively on a regular basis to detect violations committed in making trades and executing customer orders on the floor or subject to the rules of such contract market, including— “(i) all types of violations attributable to dual trading; and “(ii) to the full extent feasible, as determined by the Commission, all other types of violations involving the making of trades and the execution of customer orders; “(D) the use of information gathered through such system on a consistent basis to bring appropriate disciplinary actions against violators; “(E) the commitment of resources to such system necessary for such system to be effective in detecting and deterring such violations, including adequate staff to develop and prosecute disciplinary actions; and “(F) the assessment of meaningful penalties against violators and the referral of appropriate cases to the Commission. “(2) The audit trail system of the contract market shall, consistent Records. with Commission regulations, accurately record— “(A) the times of trades in increments of no more than one minute in length; and “(B) the sequence of trades for each floor trader and broker. “(3) Beginning three years after the date of enactment of this Records. subsection, the audit trail system of each contract market, except as provided in paragraph (5) and except to the extent the Commission determines that circumstances beyond the control of the contract market prevent compliance despite the contract market’s affirmative good faith efforts to comply, shall— “(A) for all trades, record accurately and promptly the essential data on terms, participants, and times as required by the Commission by rule, including the time of execution of such trade, through a means that— “(i) records such data in a form which cannot be altered except in a manner that will leave a complete and independent record of such alteration; “(ii) continually provides such data to the contract market; “(iii) identifies such time, to the extent practicable as determined by the Commission— “(I) independently of the person making the trade; “(II) through a mechanism that records the time automatically when entered by the person making the trade; or “(III) through such other means that will capture a similarly reliable time; and “(iv) is adequately precise to determine, to the extent practicable as determined by the Commission by rule or order— “(I) the sequence of all trades by each floor trader; and “(II) the sequence of all trades by each floor broker; and “(B) to the extent practicable as determined by the Commission by rule or order, for customer trades, record the time that each order is received on the floor of the board of trade, is received by the floor broker for execution (or when such order is transmitted in an extremely rapid manner to the broker), and is reported from the floor of the board of trade as executed, through a means that— “(i) records such times in a form which cannot be altered except in a manner that will leave a complete and independent record of such alteration; “(ii) continually provides such data to the contract market; “(iii) identifies such time— “(I) independently of the person making the trade or processing the order; “(II) through a mechanism that records the time automatically when entered by the person making the trade or processing such order, as appropriate; or “(III) through such other means as will capture a similarly reliable time; and “(iv) is adequately precise to determine— “(I) the sequence in which, for each futures commission merchant, floor broker, or member firm, as applicable, all orders are received on and reported from the floor of the contract market; and “(II) the sequence in which orders are received by each floor broker for execution. “(4) The Commission may, by rule, establish standards under which the audit trail systems required under paragraph (3) shall record, to the extent practicable— “(A) the sequence of all trades made by all floor traders and floor brokers; and “(B) the interval between the time of receipt and the time of execution of each order by the floor broker executing the order. “(5) (A) The Commission shall, by rule or order, make exemptions from the requirements of paragraph (3)— “(i) for an exchange with respect to which the Commission finds that— “(I) the volume of trading on such exchange is relatively small and the exchange has demonstrated substantial compliance with the objectives of such paragraph; and “(II) the trade monitoring system at such exchange otherwise maintains a high level of compliance with this subsection; and “(ii) to the extent determined appropriate by the Commission, for categories of customer orders with respect to which the Commission finds that such orders are transmitted to and reported from the trading pit in an extremely rapid manner such that substantial compliance with the objectives of paragraph (3) can be otherwise achieved. “(B) For purposes of subparagraph (A)(i)(I) the Commission shall find that the volume of trading at an exchange is relatively small if, among other things, the Commission determines that the average daily trading volume for each contract market for which the board of trade is designated is less than the threshold trading level established for the contract market under section 4j(a)(4). “(6) Any rule or order adopted by the Commission under paragraphs Effective date. (4) and (5) shall become effective thirty legislative days or ninety calendar days, whichever is later, after submission of such rule or order to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate. For purposes of this paragraph, the term ‘legislative day’ means any day on which either House of Congress is in session.”. (b) Study.— (1) In general.— Not later than two years after the date 7 USC 7a note. Reports. of enactment of this Act, the Commodity Futures Trading Commission shall submit to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate a report that contains— (A) an assessment of the progress of each contract market in developing and implementing systems to record the times of transactions independently, precisely, and completely as required under section 5a(b) of the Commodity Exchange Act (as added by subsection (a) of this section); and (B) recommendations as to whether any extension of time for the completion of such systems or any modification of the standards contained in such section is appropriate. (2) GAO views.— The Comptroller General of the United States shall state to Congress the views of the Comptroller General with regard to the issues addressed in such report. (c) Audit Trail Compliance as Condition for Contract Market Designation.— Section 5 (7 U.S.C. 7) is amended by— (1) indenting the left margin of subdivisions (a) through (g) by 2 ems; (2) striking “(a)”, “(b)”, “(c)”, “(d)”, “(e)”, “(f)”, and “(g)”, and inserting “(1)”, “(2)”, “(3)”, ”(4)”, “(5)”, “(6)”, and “(7)”, respectively; and (3) adding at the end the following: “(8) When such board of trade demonstrates that every contract market for which such board of trade is designated complies with the requirements of section 5a(b).”. SEC. 202. COMMISSION OVERSIGHT; DEFICIENCY ORDERS. (a) In General.— The Act is amended by inserting after section 8d (7 U.S.C. 12d) the following new section: “SEC. 8e. COMMISSION OVERSIGHT; DEFICIENCY ORDERS. “(a) Assessments.— At least once every two years, to the extent practicable, the Commission shall assess whether the trade monitoring system of each contract market satisfies section 5a(b). “(b) Deficiency Orders.— “(1) Causes.— The Commission may issue a proposed deficiency order in accordance with paragraph (2), or take such other administrative or enforcement action as the Commission determines is appropriate, if, based on its assessment or on other information, the Commission at any time has reason to believe that a contract market’s trade monitoring system implemented pursuant to section 5a(b) does not satisfy one or more of the requirements of such section. “(2) Contents.— A proposed deficiency order issued under this subsection shall specify— “(A) the deficiencies the Commission has reason to believe exist in the trade monitoring system of the contract market and a statement of reasons supporting the Commission’s belief that those deficiencies exist; “(B) the corrective action that the Commission believes that the contract market must take and an acceptable timetable for such corrective action; and “(C) a date, not less than twenty days from the date of issuance of the proposed deficiency order, when such deficiency order will become final, subject to subsection (d). “(3) Remedies.— On becoming final, the Commission deficiency order may— “(A) require the contract market to— “(i) institute appropriate improvements in its trade monitoring system necessary to correct the deficiencies noted therein; “(ii) satisfy stated objective performance criteria to correct such deficiencies; “(iii) upgrade or reconfigure existing systems for collecting or processing relevant data on trading and trader or broker activity, including, where appropriate, the commitment of additional resources; or “(B) revoke any exemption of the contract market from the regulations prohibiting the privilege of dual trading under section 4j(a), if the deficiency noted in such deficiency order relates to— “(i) the audit trail system the contract market is required to maintain under paragraph (2), (3), or (4) of section 5a(b); or “(ii) the prevention, detection, or disciplining of violations attributable to such trading at such contract market, subject to the standards, exceptions, and duration provisions of section 4j(a); or “(C) take any combination of the actions described in subparagraphs (A) and (B). “(4) Removal.— If the Commission finds, after notice and opportunity for a hearing on the record prior to such deficiency order becoming final, that a named officer, director, committee member, or employee of such contract market has willfully— “(A) violated this Act, the rules or regulations of the Commission thereunder, or the rules of such contract market; “(B) abused the authority of such person; or “(C) without reasonable justification or excuse, failed to enforce compliance with any provision of the rules of such contract market by any member or person associated with a member thereof, the Commission may issue a deficiency order under this section to remove such officer, director, committee member, or employee. “(5) Designation as contract market.— Notwithstanding section 6, during the period that a proposed or final deficiency order under this section is in effect, the Commission may refrain from approving any application for designation as a contract market made by the board of trade whose contract market is the subject of such deficiency order. “(6) Delegation.— The Commission shall not delegate the authority to issue deficiency orders under this subsection. “(c) Rescission, Modification, or Delay of Deficiency Orders.— Before any proposed deficiency order issued by the Commission under subsection (b) may become final, the Commission shall— “(1) provide the affected contract market with an opportunity for a hearing through submission of written data, views, or arguments and, under terms set by the Commission at the request of the contract market, through an oral presentation of views and comments to the Commission, in order to petition the Commission to rescind, modify, or delay such deficiency order; and “(2) rule on such petition, not less than twenty days before the deficiency order takes effect, making findings, as appropriate, as to whether— “(A) the deficiencies cited by the Commission have been corrected or are being corrected under an expeditious timetable acceptable to the Commission; “(B) the trade monitoring system of the contract market is deficient as noted in the deficiency order; or “(C) the timetable for corrective action by the contract market in the proposed deficiency order, and the particular corrective action proposed, is appropriate in light of the deficiencies noted and the purposes of this Act. “(d) Penalties.— Violation of a final deficiency order issued under subsection (c) shall be considered a violation of an order of the Commission for purposes of— “(1) establishing liability and assessing penalties against a contract market or any director, officer, agent, or employee thereof under section 6b or 6c; or “(2) initiating proceedings under section 5b or 6(a). “(e) Judicial Review.— “(1) Persons.— Any person, other than a contract market, aggrieved by a deficiency order issued under subsection (b)(4), may obtain review of such deficiency order when issued by the Commission under the terms and conditions in section 6(b). “(2) Contract markets.— Any contract market that has petitioned the Commission to rescind, modify, or delay any proposed deficiency order issued under subsection (b) may obtain judicial review of any final such deficiency order only in the United States Court of Appeals for the circuit in which the party seeking review resides or has its principal place of business, or in the United States Court of Appeals for the District of Columbia Circuit, under the standards applicable to rulemaking proceedings under section 553 of title 5, United States Code.”. SEC. 203. ORAL ORDERS. (a) In General.— Section 4c (7 U.S.C. 6c) is amended by adding at the end the following new subsection: “(g) The Commission shall adopt rules requiring that a contemporaneous written record be made, as practicable, of all orders for execution on the floor or subject to the rules of each contract market placed by a member of the contract market who is present on the floor at the time such order is placed.”. (b) Effective Date.— The Commission shall adopt the rules required by the amendment made under subsection (a) within two hundred and seventy days after the date of enactment of this Act. SEC. 204. TELEMARKETING FRAUD. (a) In General.— Section 17(p) (7 U.S.C. 21(p)) is amended— (1) by striking “and” at the end of paragraph (2); (2) by striking the period at the end of paragraph (3) and inserting and”; and (3) by adding at the end the following new paragraph: “(4) establish special supervisory guidelines to protect the public interest relating to the solicitation by telephone of new futures or options accounts and make such guidelines applicable to those members determined to require such guidelines in accordance with standards established by the Commission consistent with this Act. Such guidelines may include a requirement that, with respect to a customer with no previous futures or commodity options trading experience, the member may not enter an order for the account of such customer for a period of three days following opening of the account and receipt of a signed acknowledgment by the customer of receipt of a risk disclosure statement.”. (b) Implementation.— The guidelines required under section 17(p)(4) of the Commodity Exchange Act (as added by subsection (a) of this section) shall be submitted by a futures association registered with the Commodity Futures Trading Commission on the date of enactment of this Act to the Commission for the approval of the Commission not later than one hundred and eighty days after the date of enactment of this Act. SEC. 205. UNDERCOVER OPERATIONS AND ENFORCEMENT. Section 8(a) of the Commodity Exchange Act (7 U.S.C. 12(a)) is amended by— (1) inserting “(1)” after “(a)”; and (2) adding at the end the following: “(2) In conducting investigations authorized under this subsection or any other provision of this Act, the Commission shall continue, as the Commission determines necessary, to request the assistance of and cooperate with the appropriate Federal agencies in the conduct of such investigations, including undercover operations by such agencies. The Commission and the Department of Justice shall assess the effectiveness of such undercover operations and, within two years of the date of enactment of the Futures Trading Practices Act of 1992, shall recommend to Congress any additional undercover or other authority for the Commission that the Commission or the Department of Justice believes to be necessary.”. SEC. 206. SELF REGULATORY ORGANIZATION DISCIPLINARY COMMITTEES AND GOVERNING BOARDS. (a) Contract Markets.— (1) Governing boards and disciplinary committees.— Subsection (a) of section 5a (7 U.S.C. 7a) (as amended by sections 201(a)(1) and 217 of this Act) is further amended by adding at the end the following new paragraphs: “(14) (A) provide for meaningful representation on the governing board of the contract market’s board of trade of a diversity of interests, including— “(i) futures commission merchants; “(ii) producers of, and consumers, processors, distributors, or merchandisers of, principal commodities traded on the board of trade; “(iii) floor brokers and traders; and “(iv) participants in a variety of pits or principal groups of commodities traded on the exchange. “(B) provide that no less than 20 percent of the regular voting members of such board be comprised of nonmembers of such contract market’s board of trade with— “(i) expertise in futures trading, or the regulation thereof, or in commodities traded through contracts on the board of trade; or “(ii) other eminent qualifications making such person capable of participating in and contributing to board deliberations. “(C) provide that no less than 10 percent of the regular voting members of such board be comprised where applicable of farmers, producers, merchants, or exporters of principal commodities traded on the exchange; “(15) (A) provide on all major disciplinary committees for a diversity of membership sufficient to ensure fairness and to prevent special treatment or preference for any person in the conduct of disciplinary proceedings and the assessment of penalties. “(B) Consistent with Commission rules, a major disciplinary committee hearing a disciplinary matter shall include— “(i) a majority of qualified persons representing a trading status other than that of the subject of the proceeding; and “(ii) where appropriate to carry out the purposes of this Act, qualified persons who are not members of the exchange. “(C) For purposes of this paragraph, a trading status on a contract market may include, consistent with Commission rules, such categories as (i) floor brokers and traders; (ii) producers, consumers, processors, distributors, or merchandisers of commodities; (iii) futures commission merchants; and (iv) members of the aforementioned categories who participate in particular contract markets or principal groups of commodities on the board of trade. “(D) If a contract market takes final disciplinary action against a member for a violation that involves the execution of a customer transaction and results in financial harm to such customer, the contract market shall promptly inform the futures commission merchant identified on the records of such contract market as having cleared such transaction, and such futures commission merchant shall promptly inform the person identified on its records as the owner of the account for which such transaction was executed, of the disciplinary action and the principal facts thereof; “(16) provide that no member found by the Commission, a contract market, a registered futures association, or a court of competent jurisdiction to have committed any violation of this Act or any other provision of law that would reflect on the fitness of the member may serve on any contract market oversight or disciplinary panel for an appropriate period (as defined by Commission rule); and”. (2) Major disciplinary rule violations.— Section 8c (7 U.S.C. 12c) is amended— (A) by redesignating subsections (1) through (4) as subsections (a) through (d); (B) in subsection (a), as so redesignated— (i) by striking “(A)” and inserting “(1)”; and (ii) by striking “(B)” and inserting “(2)”; (C) in subsection (c), as so redesignated, by striking “subsection (2)” each place it appears and inserting “subsection (b)”; (D) in subsection (d), as so redesignated, by striking “subsection (1)” and inserting “subsection (a)”; and (E) by adding at the end the following: “(e) (1) The Commission shall issue regulations requiring each contract market to establish and make available to the public a schedule of major violations of any rule within the disciplinary jurisdiction of such contract market. “(2) The regulations issued by the Commission pursuant to this subsection shall prohibit, for a period of time to be determined by the Commission, any individual who is found to have committed any major violation from service on the governing board of any contract market or registered futures association, or on any disciplinary committee thereof.” (b) Registered Futures Associations.— (1) Governing boards and disciplinary committees.— Section 17(b) (7 U.S.C. 21(b)) is amended— (A) in subparagraphs (A) and (B) of paragraph (3) by striking “or” at the end; (B) in paragraphs (3)(D), (4)(A), (4)(B), (4)(C), (4)(D), (4)(F), (5), (6), (7), (8), (9), (9)(A), (9)(B), and (9)(D) by striking the period at the end and inserting a semicolon; (C) in paragraphs (4)(E), (9)(C), and (10) by striking the period at the end and inserting “; and”; and . (D) by adding at the end the following new paragraphs: “(11) such association provides for meaningful representation on the governing board of such association of a diversity of membership interests and provides that no less than 20 percent of the regular voting members of such board be comprised of qualified nonmembers of or persons who are not regulated by such association. “(12) (A) such association provides on all major disciplinary committees for a diversity of membership sufficient to ensure fairness and to prevent special treatment or preference for any person in the conduct of disciplinary proceedings and the assessment of penalties. “(13) heading>A major disciplinary committee hearing a disciplinary matter shall include— “(A) qualified persons representing segments of the association membership other than that of the subject of the proceeding; and “(B) where appropriate to carry out the purposes of this paragraph, qualified persons who are not members of the association.”. (2) Major disciplinary rule violations.— Section 17 (7 U.S.C. 21), as amended by section 204, is amended by inserting after subsection (p) the following: “(q) (1) The Commission shall issue regulations requiring each registered futures association to establish and make available to the public a schedule of major violations of any rule within the disciplinary jurisdiction of such registered futures association. “(2) The regulations issued by the Commission pursuant to this subsection shall prohibit, for a period of time to be determined by the Commission, any member of a registered futures association who is found to have committed any major violation from service on the governing board of any registered futures association or contract market, or on any disciplinary committee thereof.” (c) Implementation.— Not later than two hundred and seventy 7 USC 7a note. days after the date of enactment of this Act, the Commodity Futures Trading Commission shall adopt such rules as are necessary to carry out the amendments made by subsections (a) and (b), including rules that— (1) specify membership categories that shall be represented on disciplinary panels; (2) define major disciplinary committee” for purposes of sections 5a(a)(15) and 17(b)(12) of the Commodity Exchange Act (as added by subsections (a) and (b), respectively); and (3) specify the conditions under which such panels shall include qualified persons who are not members of the exchange or association, which shall include at a minimum— (A) any disciplinary action where the subject of such action is a member of the contract market or association governing board or of any major disciplinary committee of such contract market or association; and (B) any disciplinary action based on facts related to a claim that the subject of such action manipulated or attempted to manipulate the price of a commodity or future or option. SEC. 207. REQUIRED REGISTRATION OF FLOOR TRADERS. (a) Requirement.— Section 4e (7 U.S.C. 6e) is amended to read as follows: “Sec. 4e. It shall be unlawful for any person to act as floor trader in executing purchases and sales, or as floor broker in executing any orders for the purchase or sale, of any commodity for future delivery, or involving any contracts of sale of any commodity for future delivery, on or subject to the rules of any contract market unless such person shall have registered, under this Act, with the Commission as such floor trader or floor broker and such registration shall not have expired nor been suspended nor revoked. (b) Conforming Amendments.— The Act is amended— (1) in sections 4f(1), 4g(1), and 6d(1) (7 U.S.C. 6f(1), 6g(1), 13a–2(1)), by striking “or floor broker” and inserting “floor broker, or floor trader; (2) in section 6d(8)(A) (7 U.S.C. 13a–2(8)(A)), by inserting “, floor trader,” after “floor broker”; (3) in section 8a(1), (7 U.S.C. 12a(1)), by striking “and floor brokers” and inserting “floor brokers, and floor traders”; and (4) in sections 8a(2)(C)(i), 8a(2)(D)(ii), and 8a(3)(E)(ii) (7 U.S.C. 12a(2)(C)(i), 12a(2)(D)(ii), and 12a(3)(E)(ii)), by inserting “floor trader,” after “floor broker,”. (c) Regulations.— The amendments made by this section shall become effective one hundred and eighty days after the date of enactment of this Act, and the Commodity Futures Trading Commission shall issue any regulations necessary to implement the amendments made by this section no later than one hundred and eighty days after the date of enactment of this Act. SEC. 208. ENHANCEMENT OF REGISTRATION REQUIREMENTS. (a) Injunctions.— Section 8a(2)(C)(ii) (7 U.S.C. 12a(2)(C)(ii)) is amended to read as follows: “(ii) engaging in or continuing any activity where such activity involves embezzlement, theft, extortion, fraud, fraudulent conversion, misappropriation of funds, securities or property, forgery, counterfeiting, false pretenses, bribery, gambling, or any transaction in or advice concerning contracts of sale of a commodity for future delivery, concerning matters subject to Commission regulation under section 4c or 19, or concerning securities”. (b) Certain Violations of Law.— Section 8a(2)(D)(iv) (7 U.S.C. 12a(2)(D(iv)) is amended by— (1) inserting “1001,” after “152,”; (2) striking “or” after “1342,”; (3) inserting “1503, 1623, 1961, 1962, 1963, or 2314,” after “1343,”; and (4) inserting “, or section 7201 or 7206 of the Internal Revenue Code of 1986” after “Code”. (c) Other Violations of Law.— Section 8a(2)(E) (7 U.S.C. 12a(2)(E)) is amended— (1) by striking “by any court of competent jurisdiction,” and inserting “in a proceeding brought”; and (2) in clause (i) by inserting “chapter 96 of title 18 of the United States Code,” after “1977,”. (d) Registration Revocation Based on Inaccurate Statements.— Section 8a(2)(G) (7 U.S.C. 12a(2)(G)) is amended by— (1) striking “subparagraphs (A) through (F) of this paragraph,” and inserting “this paragraph and paragraph (3),”; (2) striking “material” the first place it appears and inserting “materially”; and (3) striking “application” and inserting “application or any update thereto”. (e) General Felony Convictions.— Section 8a(3)(D) (7 U.S.C. 12a(3)(D)) is amended by— (1) inserting “pleaded guilty to or” after “person”; (2) inserting a comma after “section” the first place it appears; (3) striking “within ten years preceding the filing of the application or at any time thereafter,”; (4) striking “, including a felony”; and (5) striking “, more than” and inserting “more than”. (f) Special Felony Convictions.— Section 8a(3)(E) (7 U.S.C. 12a(3)(E)) is amended— (1) by inserting “pleaded guilty to or” after “person”; (2) by striking “within ten years preceding the filing of the application for registration or at any time thereafter”; and (3) in clause (iv) by inserting “, or section 7203, 7204, 7205, or 7207 of the Internal Revenue Code of 1986” after “Code”. (g) Registration Denied or Conditioned Based on Inaccurate Statements.— Section 8a(3)(G) (7 U.S.C. 12a(3)(G)) is amended by— (1) striking “material” the first place it appears and inserting “materially”; (2) striking the comma after “application”; (3) inserting “or any update thereto,” after “application”; (4) striking “thereunder, or” and inserting “thereunder,”; and (5) inserting “or in any registration disqualification proceeding” after “Commission”. (h) Non-Federal Criminal Conduct.— Section 8a(3)(H) (7 U.S.C. 12a(3)(H)) is amended by inserting “, in a United States military court,” after “State court”. (i) Existing Restrictions on Memberships.— Section 8a(3)(J) (7 U.S.C. 12a(3)(J)) is amended by— (1) striking “or” after “association,” the first place it appears; (2) inserting “or any foreign regulatory body that the Commission recognizes as having a comparable regulatory program” after “organization,” the first place it appears; (3) striking “or” after “association,” the second place it appears; and (4) striking “organization;” and inserting “organization, or foreign regulatory body;”. SEC. 209. ENFORCEMENT OF CIVIL MONEY PENALTIES. (a) Money Penalties.— Section 6 (7 U.S.C. 8 et seq.) is amended— (1) by redesignating subsections (a) through (d) as subsections (b) through (e), respectively; (2) by inserting “(a)” after “Sec. 6”; (3) in subsection (a), as so redesignated, by striking “paragraph (a)” and inserting “subsection (b)”; (4) in subsection (d), as so redesignated— (A) by striking “paragraph (b) of this section” and inserting “subsection (c)”; and (B) by striking “section 6(b) of this Act” and inserting “subsection (c)”; and (5) by amending subsection (e), as so redesignated, to read as follows: “(e) (1) In determining the amount of the money penalty assessed under subsection (c), the Commission shall consider the appropriateness of such penalty to the gravity of the violation. “(2) Unless the person against whom a money penalty is assessed under subsection (c) shows to the satisfaction of the Commission within fifteen days from the expiration of the period allowed for payment of such penalty that either an appeal as authorized by subsection (c) has been taken or payment of the full amount of the penalty then due has been made, at the end of such fifteen-day period and until such person shows to the satisfaction of the Commission that payment of such amount with interest thereon to date of payment has been made— “(A) such person shall be prohibited automatically from trading on all contract markets; and “(B) if such person is registered with the Commission, such registration shall be suspended automatically. “(3) If a person against whom a money penalty is assessed under subsection (c) takes an appeal and if the Commission prevails or the appeal is dismissed, unless such person shows to the satisfaction of the Commission that payment of the full amount of the penalty then due has been made by the end of thirty days from the date of entry of judgment on the appeal— “(A) such person shall be prohibited automatically from trading on all contract markets; and “(B) if such person is registered with the Commission, such registration shall be suspended automatically. If the person against whom the money penalty is assessed fails to pay such penalty after the lapse of the period allowed for appeal or after the affirmance of such penalty, the Commission may refer the matter to the Attorney General who shall recover such penalty by action in the appropriate United States district court.”. (b) Conforming Amendments.— The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended— (1) in section 2(a)(1)(B)(iv)— (A) in subclause (I) by striking “section 6(b)” and inserting “section 6(c)”; and (B) in subclause (II) by striking “section 6(a)” and inserting “section 6(b)”; (2) in section 5(6), as so redesignated by section 201(c)(2), by striking “paragraph (b) of section 6” and inserting “section 6(c)”; (3) in section 5b by striking “paragraph (a) of section 6” 7 USC 7b. and inserting “section 6(b)”; (4) in section 6a(1) by striking “paragraph (a) of section 7 USC 10a. 6” and inserting “section 6(b)”; (5) in section 6b by striking “paragraph (a) of section 6” 7 USC 13a. and inserting “section 6(b)”; (6) in section 8a— 7 USC 12a. (A) in the first proviso to paragraph (2) by striking “section 6(b)” and inserting “section 6(c)”; (B) in the second proviso to paragraph (3) by striking “section 6(b)” and inserting “section 6(c)”; and (C) in paragraph (4) by striking “section 6(b)” each place it appears and inserting “section 6(c)”; (7) in section 14(e) by striking “paragraph (b) of section 7 USC 18. 6” and inserting “section 6(c)”; and (8) in section 17— 7 USC 21. (A) in subsection (b)— (i) in paragraph (3)(B) by striking “section 6(b)” and inserting “section 6(c)”; and (ii) in paragraph (4)(F) by striking “subsection (b)” of section and inserting “section 6(c)”; (B) in subsection (i)(4) by striking “section 6(b)” and inserting “section 6(c)”; and (C) in subsection (o)(4) by striking “section 6(b)” and inserting “section 6(c)”. SEC. 210. ETHICS TRAINING FOR REGISTRANTS. (a) Mandatory Training for Registrants.— Section 4p (7 U.S.C. 6p) is amended by— (1) inserting “(a)” after “Sec. 4p.”; and (2) adding at the end the following: “(b) The Commission shall issue regulations to require new registrants, within six months after receiving such registration, to attend a training session, and all other registrants to attend periodic training sessions, to ensure that registrants understand their responsibilities to the public under this Act, including responsibilities to observe just and equitable principles of trade, any rule or regulation of the Commission, any rule of any appropriate contract market, registered futures association, or other self-regulatory organization, or any other applicable Federal or state law, rule or regulation.”. (b) Regulations.— The Commodity Futures Trading Commission 7 USC 6p note. shall issue the regulations required by section 4p(b) of the Commodity Exchange Act, as added by subsection (a), no later than one hundred and eighty days after the date of enactment of this Act. SEC. 211. NATIONWIDE SERVICE OF PROCESS AND VENUE. Section 22(c) (7 U.S.C. 25(c)) is amended to read as follows: “(c) The United States district courts shall have exclusive jurisdiction Courts. of actions brought under this section. Any such action shall be brought not later than two years after the date the cause of action arises. Any action brought under subsection (a) of this section may be brought in any judicial district wherein the defendant is found, resides, or transacts business, or in the judicial district wherein any act or transaction constituting the violation occurs. Process in such action may be served in any judicial district of which the defendant is an inhabitant or wherever the defendant may be found.”. SEC. 212. INCREASED PENALTIES. (a) Felony Violations.— Section 9 (7 U.S.C. 13) is amended— (1) by— (A) striking subsections (a), (b), and (c); (B) redesignating subsections (d) and (e) as subsections (c) and (d), respectively; and (C) inserting before subsection (c), as redesignated, the following new subsections: “(a) It shall be a felony punishable by a fine of not more than $1,000,000 (or $500,000 in the case of a person who is an individual) or imprisonment for not more than five years, or both, together with the costs of prosecution, for: “(1) Any person registered or required to be registered under this Act, or any employee or agent thereof, to embezzle, steal, purloin, or with criminal intent convert to such person’s use or to the use of another, any money, securities, or property having a value in excess of $100, which was received by such person or any employee or agent thereof to margin, guarantee, or secure the trades or contracts of any customer or accruing to such customer as a result of such trades or contracts or which otherwise was received from any customer, client, or pool participant in connection with the business of such person. The word ‘value’ as used in this paragraph means face, par, or market value, or cost price, either wholesale or retail, whichever is greater. “(2) Any person to manipulate or attempt to manipulate the price of any commodity in interstate commerce, or for future delivery on or subject to the rules of any contract market, or to comer or attempt to comer any such commodity or knowingly to deliver or cause to be delivered for transmission through the mails or interstate commerce by telegraph, telephone, wireless, or other means of communication false or misleading or knowingly inaccurate reports concerning crop or market information or conditions that affect or tend to affect the price of any commodity in interstate commerce, or knowingly to violate the provisions of section 4, section 4b, sub-sections (a) through (e) of subsection 4c, section 4h, section 4o(l), or section 19. “(3) Any person knowingly to make, or cause to be made, any statement in any application, report, or document required to be filed under this Act or any rule or regulation thereunder or any undertaking contained in a registration statement required under this Act, or by any contract market or registered futures association in connection with an application for membership or participation therein or to become associated with a member thereof, which statement was false or misleading with respect to any material fact, or knowingly to omit any material fact required to be stated therein or necessary to make the statements therein not misleading. “(4) Any person willfully to falsify, conceal, or cover up by any trick, scheme, or artifice a material fact, make any false, fictitious, or fraudulent statements or representations, or make or use any false writing or document knowing the same to contain any false, fictitious, or fraudulent statement or entry to a contract market, board of trade, or futures association designated or registered under this Act acting in furtherance of its official duties under this Act. “(5) Any person willfully to violate any other provision of this Act, or any rule or regulation thereunder, the violation of which is made unlawful or the observance of which is required under the terms of this Act, but no person shall be subject to imprisonment under this paragraph for the violation of any rule or regulation if such person proves that he had no knowledge of such rule or regulation. “(b) Any person convicted of a felony under this section shall be suspended from registration under this Act and shall be denied registration or reregistration for five years or such longer period as the Commission may determine, and barred from using, or participating in any manner in, any market regulated by the Commission for five years or such longer period as the Commission shall determine, on such terms and conditions as the Commission may prescribe, unless the Commission determines that the imposition of such suspension, denial of registration or reregistration, or market bar is not required to protect the public interest. The Commission may upon petition later review such disqualification and market bar and for good cause shown reduce the period thereof.”; (2) in subsection (c) (as redesignated by paragraph (1) of this section) by striking “$100,000” and inserting “$500,000”; and (3) in subsection (d) (as redesignated by paragraph (1) of this section) by striking “$100,000” and inserting “$500,000”. (b) Other Violations.— Section 6(c) and 6(d) (7 U.S.C. 9 and 13b), as such subsections are redesignated by section 209, are each amended by striking “$100,000” each place it appears and inserting “the higher of $100,000 or triple the monetary gain to such person”. (c) Nonenforcement of Rules of Government or Other Violations.— Section 6b (7 U.S.C. 13a) is amended— (1) by striking “$100,000” each place it appears and inserting “$500,000”; and (2) in the last sentence, by striking “the appropriateness of such penalty to the net worth of the offending person and”. SEC. 213. CONTRACT MARKET EMERGENCY ACTIONS. (a) Prior Commission Notification Required.— Section 5a(a)(12) (7 U.S.C. 7a(12)), as redesignated by section 201, is amended— (1) by striking “(12) except” and inserting “(12)(A) except”; and (2) by striking the last two sentences of paragraph (12)(A) as so redesignated, and inserting the following: “(B) (i) The Commission shall issue regulations to specify the terms and conditions under which, in an emergency as defined by the Commission, a contract market may, by a two-thirds vote of its governing board, make a rule (hereinafter referred to as an emergency rule’) effective on a temporary basis without prior Commission approval, or without compliance with the ten-day notice requirement under subparagraph (A), or during any period of review by the Commission, if the contract market makes every effort practicable to notify the Commission of such emergency rule, along with a complete explanation of the emergency involved, prior to making the emergency rule effective. If the contract market does not provide the Commission with such notification and explanation before making the emergency rule effective, the contract market shall provide the Commission with such notification and explanation at the earliest possible date. The Commission may delegate the power to receive such notification and explanation to such individuals as the Commission determines necessary and appropriate. “(ii) Within ten days of the receipt from a contract market of notification of such an emergency rule and an explanation of the emergency involved, or as soon as practicable, the Commission shall determine whether it is appropriate either— “(I) to permit such rule to remain in effect during the pendency of the emergency, or “(II) to suspend the effect of such rule pending review either under the procedures of subparagraph (A) or otherwise. Reports. The Commission shall submit a report on its determination and the basis thereof with respect to such emergency rule to the affected contract market, to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate. If the report is submitted more than ten days after the Commission’s receipt of notification of such an emergency rule from a contract market, the report shall explain why submission within such ten-day period was not practicable. A determination by the Commission to suspend the effect of a rule under this subparagraph shall be subject to judicial review on the same basis as an emergency determination under section 8a(9). Nothing in this paragraph shall be construed to limit the authority of the Commission under section 8a(9);”. (b) Regulations.— The Commodity Futures Trading Commission shall issue regulations to implement section 5a(12)(B) of the Commodity Exchange Act, as added by subsection (a), no later than one hundred and eighty days after the date of enactment of this Act. Until the effective date of such regulations, any regulation of the Commission that implements the last two sentences of section 5a(12), as such sentences were in effect immediately before the date of enactment of this Act, shall remain in effect. SEC. 214. PROHIBITION AGAINST INSIDER TRADING. (a) In General.— Section 9 (7 U.S.C. 13) is amended by adding at the end the following: “(f) It shall be a felony for any person— “(1) who is an employee, member of the governing board, or member of any committee of a board of trade, contract market, or registered futures association, in violation of a regulation issued by the Commission, willfully and knowingly to trade for such person’s own account, or for or on behalf of any other account, in contracts for future delivery or options thereon on the basis of, or willfully and knowingly to disclose for any purpose inconsistent with the performance of such persons official duties as an employee or member, any material nonpublic information obtained through special access related to the performance of such duties. (2) willfully and knowingly to trade for such person’s own account, or for or on behalf of any other account, in contracts for future delivery or options thereon on the basis of any material nonpublic information that such person knows was obtained in violation of paragraph (1) from an employee, member of the governing board, or member of any committee of a board of trade, contract market, or registered futures association. Such felony shall be punishable by a fine of not more than $500,000, plus the amount of any profits realized from such trading or disclosure made in violation of this subsection, or imprisonment for not more than five years, or both, together with the costs of prosecution”. (b) Regulations.— The Commodity Futures Trading Commission 7 USC 13 note. shall issue regulations to implement the amendment made by subsection (a) not later than three hundred and sixty days after the date of enactment of this Act. SEC. 215. QUALIFICATIONS OF COMMISSIONERS. Section 2(a)(2)(A) (7 U.S.C. 4a(a)(1)) is amended by striking the second and third sentences and inserting the following: “The President. Commission shall be composed of five 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— “(i) select persons who shall each have demonstrated knowledge in futures trading or its regulation, or 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; and “(ii) seek to ensure that the demonstrated knowledge of the Commissioners is balanced with respect to such areas.”. SEC. 216. COMMISSION OPERATIONS. Section 12(b) (7 U.S.C. 16(b)) is amended— (1) by designating the first through third sentences as paragraphs (1) through (3), respectively, and (2) by adding at the end the following new paragraph: “(4) The Commission may request (in accordance with the procedures set forth in subchapter II of chapter 31 of title 5, United States Code) and the Office of Personnel Management shall authorize pursuant to the request, eight positions in the Senior Executive Service in addition to the number of such positions authorized for the Commission on the date of enactment of this sentence.”. SEC. 217. PROHIBITION ON VOTING BY INTERESTED MEMBERS. Subsection (a) of section 5a (7 U.S.C. 7a) (as amended by sections 201(a) and 206(a)(l) of this Act) is further amended by adding at the end the following: “(17) (A) provide for the avoidance of conflict of interest in deliberations by the governing board and any disciplinary and oversight committees. In order to comply with this subparagraph, each contract market shall adopt rules and procedures to require, at a minimum, that “(i) any member of a governing board or a disciplinary or other oversight committee must abstain from confidential deliberations and voting on any matter where the named party in interest is the member, the member’s employer, the member’s employee, or any other person that has a business, employment, or family relationship with the member that warrants abstention by the member; “(ii) any member of a governing board or a disciplinary or other oversight committee must abstain from voting on any significant action that would not be submitted to the Commission for its prior approval, if, as determined in accordance with regulations promulgated by the Commission, the member knowingly has a direct and substantial financial interest in the result of the vote, based either on positions held personally or at an affiliated firm; “(iii) prior to the deliberations of the governing board, disciplinary board, or other oversight committee, acting directly or indirectly through an authorized member or contract market official, the positions of the members of such board or committee, and positions of the firm or firms with which such members are affiliated, are reviewed: Provided, however, That no contract market or official, employee, member, other than the member whose position or positions are being reviewed, or agent thereof shall be subject to liability, except for liability in an action initiated by the Commission, for having conducted this review and for having taken or not taken further action; and “(iv) the board or committee shall clearly reflect, in the minutes of such meeting, that the review required in clause (iii) occurred and any decisions by a member to abstain or by the board or committee whether to direct a member or members to abstain from deliberations or voting on the matter before the board or committee. Any member prohibited from voting on a rule pursuant to this paragraph shall not be included in determining whether there has been a two-thirds vote of members of the governing board or committee as required by subparagraph (12). “(B) For the purposes of this paragraph, the term ‘significant action that would not be submitted to the Commission for its prior approval’ includes— “(i) any nonphysical emergency rule; or “(ii) any changes in margin levels designed to respond to extraordinary market conditions that are likely to have a substantial affect on prices in any contract traded on such contract market, but does not include any rule not submitted for prior Commission approval because such rule is unrelated to terms and conditions of any contract traded on such contract market. “(C) Notwithstanding the provisions of subparagraph (A)(ii), the Commission shall issue rules establishing the conditions under which a member of a board or committee who is required to abstain from voting on a significant action, as provided in subparagraph (A)(ii), may participate in deliberations on that action prior to such vote, where the member’s participation is consistent with the public interest.”. SEC. 218. STUDY OF ASSESSMENTS ON TRANSACTIONS. (a) Study.— The Comptroller General of the United States shall conduct a study to determine whether— (1) it is feasible to fund some or all of the enforcement and market surveillance activities of the Commodity Futures Trading Commission, as required by the amendments to the Commodity Exchange Act made by the Futures Trading Practices Act of 1992, through the imposition of an assessment on commodity futures and options transactions executed pursuant to the Commodity Exchange Act; and (2) a program of assessment-based funding for some or all of such enforcement and market surveillance activities would better provide resources to the Commodity Futures Trading Commission to enable the Commission to— (A) protect the interests of market users (including hedgers and speculators), producers of commodities traded on the futures markets, and the general public; and (B) maintain and enhance the credibility of such futures and options markets. (b) Report.— Not later than one year after the date of enactment of this Act, the Comptroller General shall submit to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate a report containing the Comptroller General’s determinations pursuant to subsection (a), together with any appropriate recommendations for the implementation of such a program of assessment-based funding for some or all of the Commodity Futures Trading Commission’s enforcement and market surveillance activities. SEC. 219. COMPETITIVENESS STUDY. (a) In General.— No later than eighteen months following the enactment of this Act, the Commodity Futures Trading Commission shall study the competitiveness of boards of trade over which it has jurisdiction compared with the boards of trade (or their foreign equivalent) over which foreign futures authorities, as defined in section 2(a)(1)(A) of the Commodity Exchange Act (7 U.S.C. 2(a)(l)(A)), have jurisdiction, and submit to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate a report of its findings with respect to— (1) the overall competitive status of United States boards of trade in the world market; (2) a comparison of applicable statutes, rules, or regulations as they relate to futures and options administered and enforced by the Commission and those administered and enforced by foreign futures authorities; (3) any trends in, or movements of, volume of futures and options trading to or from United States boards of trade during the period of the study, and whether such trends or movements, if any, were the result of the adoption of statutes, regulations, or other enforcement mechanisms in foreign countries or the United States, as opposed to other competitive, economic, regional, or commercial factors; (4) any significant harms or risks to the public interest, market users, traders, and commerce in relation to futures or options traded on such foreign boards of trade which may result from the absence of statutes, regulations, or other enforcement mechanisms in foreign countries or the United States or disparities in regulatory protections offered by United States and foreign authorities; and (5) any recommendations the Commission may have as a result of the study to enhance the competitive status of United States boards of trade in the world market, or to enhance the regulations of markets in the global environment, that will not impair customer confidence in United States boards of trade. (b) Cooperation.— To promote the efficient use of resources, the Commission shall endeavor, as it determines appropriate, to obtain the assistance of the General Accounting Office, the Office of the United States Trade Representative, or other appropriate offices of the Federal Government in order to obtain information with regard to trading at foreign boards of trade and the regulation of such boards of trade by foreign futures authorities. SEC. 220. COMPUTERIZED FUTURES TRADING. (a) International Competitiveness of Electronic Trading Systems.— Section 12 (7 U.S.C. 16) (as amended by section 303 of this Act) is further amended by adding at the end the following new subsection: “(g) Consistent with its responsibilities under section 18, the Commission is directed to facilitate the development and operation of computerized trading as an adjunct to the open outcry auction system. The Commission is further directed to cooperate with the Office of the United States Trade Representative, the Department of the Treasury, the Department of Commerce, and the Department of State in order to remove any trade barriers that may be imposed by a foreign nation on the international use of electronic trading systems.”. (b) Study.— The Commodity Futures Trading Commission shall conduct a study to assess— (1) the progress made under initiatives to conduct trading in futures and options subject to the jurisdiction of the Commission under the Commodity Exchange Act through systems of computers or by other electronic means; and (2) whether the experience with such systems of trading indicates that they may be useful or effective to enhance access to the futures and options markets by potential market participants, improve the ability of the Commission to audit the activities of the futures and options markets, reduce the opportunity for trading abuses, and otherwise be in the public interest or raise other related issues. (c) Report.— Not later than two years after the date of enactment of this Act, the Commission shall submit to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate a report containing the results of the study conducted under subsection (a), together with any appropriate recommendations. SEC. 221. MONEY PENALTIES IN CIVIL COURT ACTIONS. Section 6c (7 U.S.C. 13c) is amended— (1) by designating the first, second, third, fourth, fifth, and sixth sentences as subsections (a), (b), (c), (e), (f), and (g), respectively; and (2) by inserting after subsection (c) (as so designated) the following new subsection: “(d) (1) In any action brought under this section, the Commission may seek and the court shall have jurisdiction to impose, on a proper showing, on any person found in the action to have committed any violation a civil penalty in the amount of not more than the higher of $100,000 or triple the monetary gain to the person for each violation. “(2) If a person on whom such a penalty is imposed fails to pay the penalty within the time prescribed in the court’s order, the Commission may refer the matter to the Attorney General who shall recover the penalty by action in the appropriate United States district court.”. SEC. 222. CIVIL DAMAGES; LIABILITY OF FUTURES COMMISSION MERCHANTS. (a) Duties of Contract Markets.— Subsection (a)(11) of section 5a (7 U.S.C. 7a) (as amended by section 201(a)(1) of this Act) is further amended— (1) by striking “(i)” and inserting “(A)”; (2) by striking “voluntary and (ii)” and inserting “voluntary, (B)”; and (3) by inserting after the word “market” the following: “, and (C) in the case of a claim arising from a violation in the execution of an order on the floor of a contract market, such procedure shall provide, to the extent appropriate— “(i) for payment of actual damages proximately caused by such violation. If an award of actual damages is made against a floor broker in connection with the execution of a customer order, and the futures commission merchant which selected the floor broker for the execution of the customer order is held to be responsible under section 2(a)(1) for the floor broker’s violation, such futures commission merchant may be required to satisfy such award; and “(ii) where the violation is willful and intentional, for payment to the customer of punitive or exemplary damages, in addition to losses proximately caused by the violation, in an amount equal to no more than two times the amount of such losses. If punitive or exemplary damages are awarded against a floor broker in connection with the execution of a customer order, and the futures commission merchant which selected the floor broker for the execution of such order is held to be responsible under section 2(a)(1) for the floor broker’s violation, such futures commission merchant may be required to satisfy the award of punitive or exemplary damages if the floor broker fails to do so, except that such requirement shall apply to the futures commission merchant only if it willfully and intentionally selected the floor broker with the intent to assist or facilitate the floor broker’s violation;”. (b) Complaints Against Registered Persons.— Section 14(a) (7 U.S.C. 18(a)) is amended by striking “awarding actual damages proximately caused by such violation.” and inserting “ awarding— “(1) actual damages proximately caused by such violation. If an award of actual damages is made against a floor broker in connection with the execution of a customer order, and the futures commission merchant which selected the floor broker for the execution of the customer order is held to be responsible under section 2(a)(1) for the floor broker’s violation, such futures commission merchant may be required to satisfy such award; and “(2) in the case of any action arising from a willful and intentional violation in the execution of an order on the floor of a contract market, punitive or exemplary damages equal to no more than two times the amount of such actual damages. If an award of punitive or exemplary damages is made against a floor broker in connection with the execution of a customer order, and the futures commission merchant which selected the floor broker for the execution of the customer order is held to be responsible under section 2(a)(1) for the floor broker’s violation, such futures commission merchant may be required to satisfy such award if the floor broker fails to do so, except that such requirement shall apply to the futures commission merchant only if it willfully and intentionally selected the floor broker with the intent to assist or facilitate the floor broker’s violation.”. (c) Registered Futures Associations.— Section 17(b)(10) (7 U.S.C. 21(b)(10)) (as amended by section 206(b)(1) of this Act) is further amended— (1) by striking “(i)” and inserting “(A)”; (2) by striking “voluntary and (ii)” and inserting “voluntary, (B)”; and (3) by inserting after the word “association” the following: “, and (C) in the case of a claim arising from a violation in the execution of an order on the floor of a contract market, such procedure shall provide, to the extent appropriate— “(i) for payment of actual damages proximately caused by such violation. If an award of actual damages is made against a floor broker in connection with the execution of a customer order, and the futures commission merchant which selected the floor broker for the execution of the customer order is held to be responsible under section 2(a)(1) for the floor broker’s violation, such futures commission merchant may be required to satisfy such award; and “(ii) where the violation is willful and intentional, for payment to the customer of punitive or exemplary damages, in addition to losses proximately caused by the violation, in an amount equal to no more than two times the amount of such losses. If punitive or exemplary damages are awarded against a floor broker in connection with the execution of a customer order, and the futures commission merchant which selected the floor broker for the execution of such order is held to be responsible under section 2(a)(1) for the floor broker’s violation, such futures commission merchant may be required to satisfy the award of punitive or exemplary damages if the floor broker fails to do so, except that such requirement shall apply to the futures commission merchant only if it willfully and intentionally selected the floor broker with the intent to assist or facilitate the floor broker’s violation”. (d) Private Rights of Action.— Section 22(a) (7 U.S.C. 25(a)) is amended by adding at the end the following new paragraph: “(3) In any action arising from a violation in the execution of an order on the floor of a contract market, the person referred to in paragraph (1) shall be liable for— “(A) actual damages proximately caused by such violation. If an award of actual damages is made against a floor broker in connection with the execution of a customer order, and the futures commission merchant which selected the floor broker for the execution of the customer order is held to be responsible under section 2(a)(1) for the floor broker’s violation, such futures commission merchant may be required to satisfy such award; and “(B) where the violation is willful and intentional, punitive or exemplary damages equal to no more than two times the amount of such actual damages. If an award of punitive or exemplary damages is made against a floor broker in connection with the execution of a customer order, and the futures commission merchant which selected the floor broker for the execution of the customer order is held to be responsible under section 2(a)(1) for the floor broker’s violation, such futures commission merchant may be required to satisfy such award if the floor broker fails to do so, except that such requirement shall apply to the futures commission merchant only if it willfully and intentionally selected the floor broker with the intent to assist or facilitate the floor broker’s violation.#x201D;. SEC. 223. CUSTOMER RESTITUTION. The tenth sentence of section 6(c) (7 U.S.C. 9) (as redesignated by section 209(a)(1) of this Act) is amended— (1) by inserting “(1)” after “may” the first place it appears; (2) by striking “and, if” and inserting “(2) if”; (3) by striking “may suspend” and inserting “suspend”; (4) by striking “and may” and inserting “(3)”; and (5) by inserting before the period the following: “and (4) require restitution to customers of damages proximately caused by violations of such persons”. SEC. 224. COMPLAINTS AGAINST REGISTERED PERSONS; CLASS ACTION SUITS. Section 14(a) (7 U.S.C. 18(a)) (as amended by section 222(b) of this Act) is further amended— (1) by redesignating paragraphs (1) and (2) as subparagraphs (A) and (B), respectively; (2) by inserting “(1)” after the subsection designation; and (3) by adding at the end the following new paragraph: “(2) (A) An action may be brought under this subsection by any one or more persons described in this subsection for and in behalf of such person or persons and other persons similarly situated, if the Commission permits such actions pursuant to a final rule issued by the Commission. “(B) Not later than two hundred and seventy days after the date of enactment of this paragraph, the Commission shall propose and publish for public comment such rules as are necessary to carry out subparagraph (A). In developing such rules, the Commission shall consider the potential impact of such actions on resources available to the reparations system established under this Act and the relative merits of bringing such actions in Federal court.”. SEC. 225. PENALTIES STUDY AND GUIDELINES. (a) Study.— The Commodity Futures Trading Commission shall study the penalties the Commission imposes against persons found to have violated the Commodity Exchange Act (7 U.S.C. 1 et seq.) and the penalties imposed by contract markets and registered futures associations against persons found to have violated their respective rules established under such Act. (b) Report.— Not later than two years after the date of enactment of this Act, the Commission shall submit to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate a report that describes the results of the study conducted under subsection (a). The report shall— (1) include an analysis of whether systematic differences exist among penalties imposed by various contract markets and registered futures associations for similar offenses, and, if so, the causes of such differences; (2) propose industry-wide guidelines or rules to make penalty levels among contract markets and registered futures associations consistent, including, if appropriate, minimum penalties or penalty ranges for various offenses; and (3) propose guidelines or rules to make Commission penalty levels consistent, including, if appropriate, minimum penalties or penalty ranges for various offenses. SEC. 226. PUBLICATION OF COMMISSION OPINIONS. Section 2(a)(9) (7 U.S.C. 4a(h)) is amended by adding at the end the following new subparagraph: “(C) Whenever the Commission issues for official publication any opinion, release, rule, order, interpretation, or other determination on a matter, the Commission shall provide that any dissenting, concurring, or separate opinion by any Commissioner on the matter be published in full along with the Commission opinion, release, rule, order, interpretation, or determination.” SEC. 227. SUSPENSION OF REGISTRANTS CHARGED WITH FELONIES. Section 8a (7 U.S.C. 12a) is amended— (1) by striking “and” at the end of paragraph (9); (2) by striking the period at the end of paragraph (10) and inserting “; and”; and (3) by adding at the end the following new paragraph: “(11) (A) by written notice served on the person and pursuant to such rules, regulations, and orders as the Commission may adopt, to suspend or modify the registration of any person registered under this Act who is charged (in any information, indictment, or complaint authorized by a United States attorney or an appropriate official of any State) with the commission of or participation in a crime involving a violation of this Act, or a violation of any other provision of Federal or State law that would reflect on the honesty or the fitness of the person to act as a fiduciary (including an offense specified in subparagraph (D) or (E) of paragraph (2)) that is punishable by imprisonment for a term exceeding one year, if the Commission determines that continued registration of the person may pose a threat to the public interest or may threaten to impair public confidence in any market regulated by the Commission. “(B) Prior to the suspension or modification of the registration of a person under this paragraph, the person shall be afforded an opportunity for a hearing at which the Commission shall have the burden of showing that the continued registration of the person does, or is likely to, pose a threat to the public interest or threaten to impair public confidence in any market regulated by the Commission. “(C) Any notice of suspension or modification issued under this paragraph shall remain in effect until such information, indictment, or complaint is disposed of or until terminated by the Commission. “(D) On disposition of such information, indictment, or complaint, the Commission may issue and serve on such person an order pursuant to paragraph (2) or (4) to suspend, restrict, or revoke the registration of such person. “(E) A finding of not guilty or other disposition of the charge shall not preclude the Commission from thereafter instituting any other proceedings under this Act. “(F) A person aggrieved by an order issued under this paragraph may obtain review of such order in the same manner and on the same terms and conditions as are provided in section 6(b).”. SEC. 228. APPEALS BY REGISTERED FUTURES ASSOCIATIONS. Section 17(i)(4) (7 U.S.C. 21(i)(4)) is amended by striking “(other than a registered futures association).” SEC. 229. RISK ASSESSMENT FOR HOLDING COMPANY SYSTEMS. Section 4f (7 U.S.C. 60 (as amended by section 207(b)(1) of this Act) is further amended— (1) by redesignating paragraphs (1) and (2) as subsections (a) and (b), respectively; (2) in subsection (b) (as so redesignated), by striking “this paragraph (2)” and inserting “this subsection”; and (3) by adding at the end the following new subsection: “(c) (1) As used in this subsection: “(i) The term ‘affiliated person’ means any person directly or indirectly controlling, controlled by, or under common control with a futures commission merchant, as the Commission, by rule or regulation, may determine will effectuate the purposes of this subsection. “(ii) The term ‘Federal banking agency’ shall have the same meaning as the term ‘appropriate Federal banking agency’ in section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)). “(2) (A) Each registered futures commission merchant shall Records. obtain such information and make and keep such records as the Commission, by rule or regulation, prescribes concerning the registered futures commission merchant’s policies, procedures, or systems for monitoring and controlling financial and operational risks to it resulting from the activities of any of its affiliated persons, other than a natural person. “(B) The records required under subparagraph (A) shall describe, in the aggregate, each of the futures and other financial activities conducted by, and the customary sources of capital and funding of, those of its affiliated persons whose business activities are reasonably likely to have a material impact on the financial or operational condition of the futures commission merchant, includ-ing its adjusted net capital, its liquidity, or its ability to conduct or finance its operations. “(C) The Commission, by rule or regulation, may require summary reports of such information to be filed by the futures commission merchant with the Commission no more frequently than quarterly. “(3) (A), If, as a result of adverse market conditions or based on reports provided to the Commission pursuant to paragraph (2) or other available information, the Commission reasonably concludes that the Commission has concerns regarding the financial or operational condition of any registered futures commission merchant, the Commission may require the futures commission merchant to make reports concerning the futures and other financial activities of any of such person’s affiliated persons, other than a natural person, whose business activities are reasonably likely to have a material impact on the financial or operational condition of the futures commission merchant. “(B) The Commission, in requiring reports pursuant to this paragraph, shall specify the information required, the period for which it is required, the time and date on which the information must be furnished, and whether the information is to be furnished directly to the Commission or to a contract market or other self- regulatory organization with primary responsibility for examining the registered futures commission merchant’s financial and operational condition. “(4) (A) in developing and implementing reporting requirements pursuant to paragraph (2) with respect to affiliated persons subject to examination by or reporting requirements of a Federal banking agency, the Commission shall consult with and consider the views of each such Federal banking agency. If a Federal banking agency comments in writing on a proposed rule of the Commission under this subsection that has been published for comment, the Commission shall respond in writing to the written comment before adopting Federal Register, publication. the proposed rule. The Commission shall, at the request of the Federal banking agency, publish the comment and response in the Federal Register at the time of publishing the adopted rule. “(B) (i) Except as provided in clause (ii), a registered futures commission merchant shall be considered to have compiled with a recordkeeping or reporting requirement adopted pursuant to paragraph (2) concerning an affiliated person that is subject to examination by, or reporting requirements of, a Federal banking agency if the futures commission merchant utilizes for the recordkeeping or reporting requirement copies of reports filed by the affiliated person with the Federal banking agency pursuant to section 5211 of the Revised Statutes (12 U.S.C. 161), section 9 of the Federal Reserve Act (12 U.S.C. 321 et seq.), section 7(a) of the Federal Deposit Insurance Act (12 U.S.C. 1817(a), section 10(b) of the Home Owners’ Loan Act (12 U.S.C. 1467a(b)), or section 5 of the Bank Holding Company Act of 1956 (12 U.S.C. 1844). “(ii) The Commission may, by rule adopted pursuant to paragraph (2), require any futures commission merchant filing the reports with the Commission to obtain, maintain, or report supplemental information if the Commission makes an explicit finding that the supplemental information is necessary to inform the Commission regarding potential risks to the futures commission merchant. Prior to requiring any such supplemental information, the Commission shall first request the Federal banking agency to expand its reporting requirements to include the information. “(5) Prior to making a request pursuant to paragraph (3) for information with respect to an affiliated person that is subject to examination by or reporting requirements of a Federal banking agency, the Commission shall— “(A) notify the agency of the information required with respect to the affiliated person; and “(B) consult with the agency to determine whether the information required is available from the agency and for other purposes, unless the Commission determines that any delay resulting from the consultation would be inconsistent with ensuring the financial and operational condition of the futures commission merchant or the stability or integrity of the futures markets. “(6) Nothing in this subsection shall be construed to permit the Commission to require any futures commission merchant to obtain, maintain, or furnish any examination report of any Federal banking agency or any supervisory recommendations or analysis contained in the report. “(7) No information provided to or obtained by the Commission from any Federal banking agency pursuant to a request under paragraph (5) regarding any affiliated person that is subject to examination by or reporting requirements of a Federal banking agency may be disclosed to any other person (other than as provided in section 8 or section 8a(6)), without the prior written approval of the Federal banking agency. “(8) The Commission shall notify a Federal banking agency of any concerns of the Commission regarding significant financial or operational risks resulting from the activities of any futures commission merchant to any affiliated person thereof that is subject to examination by or reporting requirements of the Federal banking agency. “(9) The Commission, by rule, regulation, or order, may exempt any person or class of persons under such terms and conditions and for such periods as the Commission shall provide in the rule, regulation, or order, from this subsection and the rules and regulations issued under this subsection. In granting the exemption, the Commission shall consider, among other factors— “(A) whether information of the type required under this subsection is available from a supervisory agency (as defined in section 1101(7) of the Right to Financial Privacy Act of 1978 (12 U.S.C. 3401(7))), a State insurance commission or similar State agency, the Securities and Exchange Commission, or a similar foreign regulator; “(B) the primary business of any affiliated person; “(C) the nature and extent of domestic or foreign regulation of the affiliated person’s activities; “(D) the nature and extent of the registered futures commission merchant’s commodity futures and options activities; and “(E) with respect to the registered futures commission merchant and its affiliated persons, on a consolidated basis, the amount and proportion of assets devoted to, and revenues derived from activities in the United States futures markets. “(10) Information required to be provided pursuant to this subsection shall be subject to section 8. Except as specifically provided in section 8 and notwithstanding any other provision of law, the Commission shall not be compelled to disclose any information required to be reported under this subsection, or any information supplied to the Commission by any domestic or foreign regulatory agency that relates to the financial or operational condition of any affiliated person of a registered futures commission merchant. “(11) Nothing in paragraphs (1) through (10) shall be construed to supersede or to limit in any way the authority or powers of the Commission pursuant to any other provision of this Act or regulations issued under this Act.”.

22. 1992

    Futures Trading Practices Act of 1992

    Pub. L. 102–546 § 206(b)(1)(D) · 106 Stat. 3590

    Added · 7 U.S.C. § 21(b)(11)(13)

    Pub. L. 102–546, § 206(b)(1)(D), added pars. (11) to (13)

    Source evidence

    Code amendment note
    Subsec. (b)(11) to (13). Pub. L. 102–546, § 206(b)(1)(D), added pars. (11) to (13).

    Enacted provision · exact public law section
    (D) by adding at the end the following new paragraphs: “(11) such association provides for meaningful representation on the governing board of such association of a diversity of membership interests and provides that no less than 20 percent of the regular voting members of such board be comprised of qualified nonmembers of or persons who are not regulated by such association.

23. 1992

    Futures Trading Practices Act of 1992

    Pub. L. 102–546 § 228 · 106 Stat. 3590

    Struck · 7 U.S.C. § 21(i)(4)

    Pub. L. 102–546, § 228, which directed that “(other than a registered futures association).” be struck out, was executed by striking “(other than a registered futures association)” after “Any person” to reflect the probable intent of Congress

    Source evidence

    Code amendment note
    Subsec. (i)(4). Pub. L. 102–546, § 228, which directed that “(other than a registered futures association).” be struck out, was executed by striking “(other than a registered futures association)” after “Any person” to reflect the probable intent of Congress.

    Enacted provision · exact public law section
    SEC. 228. APPEALS BY REGISTERED FUTURES ASSOCIATIONS. Section 17(i)(4) (7 U.S.C. 21(i)(4)) is amended by striking “(other than a registered futures association).”

24. 1992

    Futures Trading Practices Act of 1992

    Pub. L. 102–546 § 209(b)(8)(B) · 106 Stat. 3590

    Changed · 7 U.S.C. § 21(i)(4)

    Pub. L. 102–546, § 209(b)(8)(B), made technical amendment to reference to sections 9 and 15 of this title to reflect change in reference to corresponding section of original act

    Target inherited from the preceding amendment note.

    Source evidence

    Code amendment note
    Pub. L. 102–546, § 209(b)(8)(B), made technical amendment to reference to sections 9 and 15 of this title to reflect change in reference to corresponding section of original act.

    Enacted provision · exact public law section
    (B) in subsection (i)(4) by striking “section 6(b)” and inserting “section 6(c)”; and

25. 1992

    Futures Trading Practices Act of 1992

    Pub. L. 102–546 § 402(12)(B) · 106 Stat. 3590

    Substituted · 7 U.S.C. § 21(l)(2)(B)

    Pub. L. 102–546, § 402(12)(B), made technical amendment to reference to this chapter appearing after “violated any provision of” to reflect change in reference to corresponding provision of original act and substituted “; and” for period at end

    Source evidence

    Code amendment note
    Subsec. (l)(2)(B). Pub. L. 102–546, § 402(12)(B), made technical amendment to reference to this chapter appearing after “violated any provision of” to reflect change in reference to corresponding provision of original act and substituted “; and” for period at end.

    Enacted provision · exact public law section
    (B) in subsection (1)(2)(B)— (i) by striking “the Commodity Exchange” and inserting “this”; and (ii) by striking the period at the end and inserting “; and”;

26. 1992

    Futures Trading Practices Act of 1992

    Pub. L. 102–546 § 209(b)(8)(C) · 106 Stat. 3590

    Changed · 7 U.S.C. § 21(o)(4)

    Pub. L. 102–546, § 209(b)(8)(C), made technical amendment to reference to sections 9 and 15 of this title to reflect change in reference to corresponding section of original act

    Source evidence

    Code amendment note
    Subsec. (o)(4). Pub. L. 102–546, § 209(b)(8)(C), made technical amendment to reference to sections 9 and 15 of this title to reflect change in reference to corresponding section of original act.

    Enacted provision · exact public law section
    (C) in subsection (o)(4) by striking “section 6(b)” and inserting “section 6(c)”.

27. 1992

    Futures Trading Practices Act of 1992

    Pub. L. 102–546 § 204(a) · 106 Stat. 3590

    Added · 7 U.S.C. § 21(p)(4)

    Pub. L. 102–546, § 204(a), added par. (4)

    Source evidence

    Code amendment note
    Subsec. (p)(4). Pub. L. 102–546, § 204(a), added par. (4).

    Enacted provision · exact public law section
    (a) In General.— Section 17(p) (7 U.S.C. 21(p)) is amended— (1) by striking “and” at the end of paragraph (2); (2) by striking the period at the end of paragraph (3) and inserting and”; and (3) by adding at the end the following new paragraph: “(4) establish special supervisory guidelines to protect the public interest relating to the solicitation by telephone of new futures or options accounts and make such guidelines applicable to those members determined to require such guidelines in accordance with standards established by the Commission consistent with this Act. Such guidelines may include a requirement that, with respect to a customer with no previous futures or commodity options trading experience, the member may not enter an order for the account of such customer for a period of three days following opening of the account and receipt of a signed acknowledgment by the customer of receipt of a risk disclosure statement.”.

28. 1992

    Futures Trading Practices Act of 1992

    Pub. L. 102–546 § 206(b)(2) · 106 Stat. 3590

    Added · 7 U.S.C. § 21(q)

    Pub. L. 102–546, § 206(b)(2), added subsec. (q) relating to major disciplinary rules violations

    Source evidence

    Code amendment note
    Subsec. (q). Pub. L. 102–546, § 206(b)(2), added subsec. (q) relating to major disciplinary rules violations.

    Enacted provision · exact public law section
    (2) Major disciplinary rule violations.— Section 17 (7 U.S.C. 21), as amended by section 204, is amended by inserting after subsection (p) the following: “(q) (1) The Commission shall issue regulations requiring each registered futures association to establish and make available to the public a schedule of major violations of any rule within the disciplinary jurisdiction of such registered futures association. “(2) The regulations issued by the Commission pursuant to this subsection shall prohibit, for a period of time to be determined by the Commission, any member of a registered futures association who is found to have committed any major violation from service on the governing board of any registered futures association or contract market, or on any disciplinary committee thereof.”

29. 2000

    Consolidated Appropriations Act, 2001

    Pub. L. 106–554 § 1(a)(5)(tI)(s123)(a)(24) · 114 Stat. 2763

    Substituted · 7 U.S.C. § 21(b)(2); 7 U.S.C. § 21(b)(3); 7 U.S.C. § 21(b)(10); 7 U.S.C. § 21(o)(1); 7 U.S.C. § 21(q)(2)

    Pub. L. 106–554, § 1(a)(5) [title I, § 123(a)(24)], substituted “registered entity” for “contract market” wherever appearing

    Source evidence

    Code amendment note
    Subsecs. (b)(2), (3), (10), (o)(1), (q)(2). Pub. L. 106–554, § 1(a)(5) [title I, § 123(a)(24)], substituted “registered entity” for “contract market” wherever appearing.

    Enacted provision · exact public law section
    (5) H.R. 5660, as introduced on December 14, 2000.

30. 2000

    Consolidated Appropriations Act, 2001

    Pub. L. 106–554 § 1(a)(5)(tII)(s251)(g) · 114 Stat. 2763

    Added · 7 U.S.C. § 21(r)

    Pub. L. 106–554, § 1(a)(5) [title II, § 251(g)], added subsec. (r)

    Source evidence

    Code amendment note
    Subsec. (r). Pub. L. 106–554, § 1(a)(5) [title II, § 251(g)], added subsec. (r).

    Enacted provision · exact public law section
    (5) H.R. 5660, as introduced on December 14, 2000.

31. 2008

    CFTC Reauthorization Act of 2008

    Pub. L. 110–246 § 13105(f) · 122 Stat. 1651

    Substituted · 7 U.S.C. § 21(r)(1)

    Pub. L. 110–246, § 13105(f), substituted “6d(c)” for “6d(3)”

    Source evidence

    Code amendment note
    Subsec. (r)(1). Pub. L. 110–246, § 13105(f), substituted “6d(c)” for “6d(3)”.

    Enacted provision · exact public law section
    (f) Sections 5c(f) and 17(r) of such Act (7 U.S.C. 7a–2(f), 21(r)) are each amended by striking “4d(3)” and inserting “4d(c)”.

32. 2010

    Wall Street Transparency and Accountability Act of 2010

    Pub. L. 111–203 title VII § 749(g) · 124 Stat. 1376

    Substituted · 7 U.S.C. § 21(r)(1)

    Pub. L. 111–203 substituted “section 6d(e) of this title” for “section 6d(c) of this title”

    Source evidence

    Code amendment note
    Subsec. (r)(1). Pub. L. 111–203 substituted “section 6d(e) of this title” for “section 6d(c) of this title”.

    Enacted provision · exact public law section
    (g) Section 17(r)(1) of the Commodity Exchange Act (7 U.S.C. 21(r)(1)) is amended by striking “section 4d(c) of this Act” and inserting “section 4d(e)”.

    Effective date note
    Amendment by Pub. L. 111–203 effective on the later of 360 days after July 21, 2010, or, to the extent a provision of subtitle A (§§ 711–754) of title VII of Pub. L. 111–203 requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of subtitle A, see section 754 of Pub. L. 111–203, set out as a note under section 1a of this title.

32 of 40 references resolved to an enrolled provision · 8 partial