(1) for one of the following persons, or (2) of which ten percent or more is owned by one of the following persons, or an aggregate of ten percent or more of which is owned by more than one of the following persons:

(i) Such individual himself, or such partnership, corporation or association itself;

(ii) In the case of a partnership, a general partner in such partnership;

(iii) In the case of a limited partnership, a limited or special partner in such partnership whose duties include:

(A) The management of the partnership business or any part thereof,

(B) The handling of trades and/or funds of customers of such partnership,

(C) The keeping of records pertaining to trades and/or funds of customers of such partnership, or

(D) The signing or co-signing of checks or drafts on behalf of such partnership;

or

(iv) In the case of a corporation or association, an officer, director owner of ten percent or more of the capital stock, of such organization;

(v) An employee of such individual, partnership, corporation or association whose duties include:

(A) The management of the business of such individual, partnership, corporation or association or any part thereof,

(B) The handling of trades and/or funds of customers of such individual, partnership, corporation or association.

(C) The keeping of records pertaining to trades and/or funds of customers of such individual, partnership, corporation or association, or

(D) The signing or co-signing of checks or drafts on behalf of such individual, partnership, corporation or association;

(vi) A spouse or minor dependent living in the same household of any of the foregoing persons;

(vii) A business affiliate that directly or indirectly controls such individual, partnership, corporation or association.

(viii) A business affiliate that, directly or indirectly is controlled by or is under common control with, such individual, partnership, corporation or as

sociation. Provided, however, That an account owned by any shareholder or member of a cooperative association of producers, within the meaning of sections 5(e) and 6(a) of the Act, which association is registered as a futures commission merchant and carries such account on its records, shall be deemed to be a customer's account and not a proprietary account of such association, unless the shareholder or member is an officer, director or manager of the association.

(z) Bona fide hedging transactions and positions—(1) General definition. Bona fide hedging transactions and positions shall mean transactions or positions in a contract for future delivery on any contract market, where such transactions or positions normally represent a substitute for transactions to be made or positions to be taken at a later time in a physical marketing channel, and where they are economically appropriate to the reduction of risks in the conduct and management of a commercial enterprise, and where they arise from:

(i) The potential change in the value of assets which a person owns, produces, manufactures, processes, or merchandises or anticipates owning, producing, manufacturing, processing, or merchandising,

(ii) The potential change in the value of liabilities which a person owns or anticipates incurring, or

(iii) The potential change in the value of services which a person provides, purchases or anticipates providing or purchasing.

Notwithstanding the foregoing, no transactions or positions shall be classified as bona fide hedging for purposes of section 4a of the Act unless their purpose is to offset price risks incidental to commercial cash or spot operations and such positions are established and liquidated in an orderly manner in accordance with sound commercial practices and unless the provisions of paragraphs (z) (2) and (3) of this section and §§ 1.47 and 1.48 of the regulations have been satisfied.

(2) Enumerated hedging transactions. The definitions of bona fide hedging transactions and positions in paragraph (z)(1) of this section in

cludes, but is not limited to, the following specific transactions and positions:

(i) Sales of any commodity for future delivery on a contract market which do not exceed in quantity:

(A) Ownership or fixed-price purchase of the same cash commodity by the same person; and

(B) Twelve months' unsold anticipated production of the same commodity by the same person provided that no such position is maintained in any future during the five last trading days of that future.

(ii) Purchases of any commodity for future delivery on a contract market which do not exceed in quantity.

(A) The fixed-price sale of the same cash commodity by the same person.

(B) The quantity equivalent of fixedprice sales of the cash products and by-products of such commodity by the same person; and

(C) Twelve months' unfilled anticipated requirements of the same cash commodity for processing, manufacturing, or feeding by the same person, provided that such transactions and positions in the five last trading days of any one future do not exceed the person's unfilled anticipated requirements of the same cash commodity for that month and for the next succeeding month.

(iii) Sales and purchases for future delivery described in paragraphs (z)(2)(i) and (z)(2)(ii) of this section may also be offset other than by the same quantity of the same cash commodity, provided that the fluctuations in value of the position for future delivery are substantially related to the fluctuations in value of the actual or anticipated cash position, and provided that the positions in any one future shall not be maintained during the five 'last trading days of that future.

(3) Non-enumerated cases. Upon specific request made in accordance with § 1.47 of the regulations, the Commission may recognize transactions and positions other than those enumerated in paragraph (z)(2) of this section as bona fide hedging in such amount and under such terms and conditions as it may specify in accordance with the provisions of § 1.47. Such transactions

and positions may include, but are not limited to, purchases or sales for future delivery on any contract market by an agent who does not own or who has not contracted to sell or purchase the offsetting cash commodity at a fixed price, provided that the person is responsible for the merchandising of the cash position which is being offset.

(aa) Associated person. This term means any natural person who (as provided in section 4k of the Act) is associated with a futures commission merchant or with an agent of a futures commission merchant, as a partner, officer, or employee (or any natural person occupying a similar status or performing similar functions), in any capacity which involves: (1) The solicitation or acceptance of customers' orders (other than in a clerical capacity) or (2) the supervision of any person or persons so engaged.

(bb) Commodity trading advisor. This term means any person who, for compensation or profit, engages in the business of advising others, either directly or through publications or writings, as to the value of commodities or as to the advisability of trading in any commodity for future delivery on or subject to the rules of any contract market, or who for compensation or profit, and as part of a regular business, issues or promulgates analyses or reports concerning commodities; but does not include (1) any bank or trust company, (2) any newspaper reporter, newspaper columnist, newspaper editor, lawyer, accountant, or teacher, (3) any floor broker or futures commission merchant, (4) the publisher of any bona fide newspaper, news magazine, or business or financial publication or general and regular circulation including their employees, (5) any contract market, and (6) such other persons not within the intent of this definition as the Commission may specify by rule, regulation, or order: Provided, That the furnishing of such services by the foregoing persons is solely incidental to the conduct of their business or profession.

(cc) Commodity pool operator. This term means any person engaged in a business which is of the nature of an investment trust, syndicate, or similar

form of enterprise, and who, in connection therewith, solicits, accepts, or receives from others, funds, securities, or property, either directly or through capital contributions, the sale of stock or other forms of securities, or otherwise, for the purpose of trading in any commodity for future delivery on or subject to the rules of any contract market, but does not include such persons not within the intent of this definition as the Commission may specify by rule or regulation or by order.

(dd) Commission. This term means the Commodity Futures Trading Commission.

Self-regulatory

organization.

(ee) This term means a contract market (as defined in § 1.3(h)), or a registered futures association under section 17 of the Act.

(ff) Designated self-regulatory organization. This term means a self-regulatory organization of which a futures commission merchant is a member or, if the futures commission merchant is a member of more than one self-regulatory organization and such futures commission merchant is the subject of an approved plan under § 1.52, then a self-regulatory organization delegated the responsibility by such a plan for monitoring and auditing such futures commission merchant for compliance with the minimum financial and related reporting requirements of the selfregulatory organizations of which the futures commission merchant is a member, and for receiving the financial reports necessitated by such minimum financial and related reporting requirements from such futures commission merchant.

(Sec. 4d, Pub. L. 74-675, 49 Stat. 1494 (7 U.S.C. 6d), as amended, Pub. L. 90-258, 82 Stat. 27, Pub. L. 93-463, 88 Stat. 1392, Pub. L. 95-405, 92 Stat. 869; sec. 4f, Pub. L. 74675, 49 Stat. 1495 (7 U.S.C. 6f), as amended, Pub. L. 90-258, 82 Stat. 28, Pub. L. 93-463, 88 Stat. 1392, Pub. L. 95-405, 92 Stat. 869; sec. 4g, Pub. L. 74-675, 49 Stat. 1496 (7 U.S.C. 6g), as amended, Pub. L. 90-258, 82 Stat. 28, Pub. L. 93-463, 88 Stat. 1392, 1415, Pub. L. 95-405, 92 Stat. 869; sec. 8a(5), Pub. L. 74-675, 49 Stat. 1501 (7 U.S.C. 12a(5)), as amended, Pub. L. 90-258, 82 Stat. 33, Pub. L. 93-463, 88 Stat. 1392; (7 U.S.C. 2-4, 4a, 6d, 6e, 6f, 6k, 6m, 6n, 6p, and 12a))

[41 FR 3194, Jan. 21, 1976; 41 FR 4255, Jan. 29, 1976, as amended at 41 FR 51814, Nov. 24, 1976; 42 FR 42750, Aug. 24, 1977; 43 FR

39967, Sept. 8, 1978; 44 FR 29450, May 21, 1979; 45 FR 80491, Dec. 5, 1980]

EFFECTIVE DATE NOTE: At 45 FR 80491, Dec. 5, 1980, § 1.3(aa) was revised, effective July 1, 1981. At 46 FR 24940, May 4, 1981, the effective date was extended to July 1, 1982. For the convenience of the user, the superseded text is set out below.

§ 1.3 Definitions.

(aa) Associated person. This term means any person who (as provided in section 4k of the Act) is associated with any futures commission merchant or with any agent of a futures commission merchant as a partner, officer, or employee (or any person occupying a similar status or performing similar functions), in any capacity which involves (1) the solicitation or acceptance of customers' orders (other than in a clerical capacity) or (2) the supervision of any person or persons so engaged.

REGISTRATION

EFFECTIVE DATE NOTE: At 45 FR 80491, Dec. 5, 1980, §§ 1.7, 1.9, 1.10a, 1.10b, 1.10c, 1.10d, 1.10e, 1.11, 1.13, 1.14, and 1.15 and the undesignated center heading "Registration" were removed, effective July 1, 1981. At 46 FR 24940, May 4, 1981, the effective date was extended to July 1, 1982.

§ 1.7 Registration required of futures com

mission merchants.

No person shall engage as futures commission merchant in the solicitation or acceptance of orders for the purchase or sale of any commodity for future delivery, on or subject to the rules of any contract market, unless the Commission has registered such person as a futures commission merchant under the Act and such registration has not expired and is not under suspension or revocation: Provided however, That a person trading solely for proprietary accounts within the meaning of § 1.3(y) shall not be required to register as a futures commission merchant; such a person trading solely for proprietary accounts as defined, shall otherwise be subject to all provisions of the Act and of the rules, regulations and orders thereunder.

EFFECTIVE DATE NOTE: At 45 FR 80491, Dec. 5, 1980, § 1.7 was removed, effective July 1, 1981. At 46 FR 24940, May 4, 1981, the effective date was extended to July 1, 1982.

§ 1.9 Registration as one type of person

not included in registration as any other type of person.

Registration as one type of person (e.g. futures commission merchant) subject to regulation under the Act shall not include registration as any other type of person subject to regulation under the Act (e.g., commodity pool operator), except that an individual who is registered as a futures commission merchant or as a floor broker (and such registration is not suspended or revoked) need not also register as an associated person.

(7 U.S.C. 6f, 6k, 6n, and 12a (Supp. V. 1975)) [42 FR 23993, May 11, 1977]

EFFECTIVE DATE NOTE: At 45 FR 80491, Dec. 5, 1980, §1.9 was removed, effective July 1, 1981. At 46 FR 24940, May 4, 1981, the effective date was extended to July 1, 1982.

MINIMUM FINANCIAL AND RELATED

REPORTING REQUIREMENTS

EFFECTIVE DATE NOTE: At 45 FR 80491, Dec. 5, 1981, the undesignated center heading reading "Minimum Financial and Related Reporting Requirements" was added, effective July 1, 1981. At 46 FR 24940, May 4, 1981, the effective date was extended to July 1, 1982.

§ 1.10 Financial reports of futures commission merchants.

(a) Application for registration. (1) Application for registration as a futures commission merchant shall be filed on form 7-R in accordance with the instructions contained therein. The initial application for registration shall be accompanied by a form 8-R executed and filed by each sole proprietor and by each natural person who is a general partner, officer, director, or branch office manager of the applicant, or who performs similar functions, or is any other controlling person of the applicant; except that an accompanying form 8-R need not be filed by an individual who is registered as a floor broker or an associated person or has applied for registration as a floor broker or an associated person and such application has not been withdrawn or denied. Any natural person (other than a floor broker or associated person) who subsequently becomes a general partner, officer, director, or branch office manager of

the registrant, or performs similar functions, or becomes any other controlling person of the registrant, shall promptly execute and file a form 8-R. Each form 8-R shall be filed in accordance with the instructions contained therein. Individuals who were previously required to submit biographical information on form 94 or who have filed a form 8-R as required by this section shall file a current form 8-R, upon request by the Commission.

(2) Except as provided in paragraph (a)(3) of this section, each person who files an application for registration as a futures commission merchant, and who is not so registered at the time of such filing, must, concurrently with the filing of such application file either: (i) A form 1-FR certified by an independent public accountant in accordance with § 1.16 as of a date not more than 45 days prior to the date on which such report is filed, or (ii) a form 1-FR as of a date not more than 45 days prior to the date on which such report is filed and a form 1-FR certified by an independent public accountant in accordance with § 1.16 as of a date not more than 1 year prior to the date on which such report is filed. Each such person must include with such financial report a statement describing the source of his current assets and representing that his capital has been contributed for the purpose of operating his business and will continue to be used for such purpose.

(3) The provisions of paragraph (a)(2) of this section do not apply to any person succeeding to and continuing the business of another futures commission merchant. Each such person who files an application for registration as a futures commission merchant and who is not so registered at the time of such filing must file a form 1-FR as of the first monthend following the date on which his registration is approved. Such report must be filed with the Commission and the designated self-regulatory organization, if any, not more than 45 days after the date for which the report is made.

(b) Filing of financial reports. (1) Except as provided in paragraph (b)(3) of this section, each person registered a futures commission merchant

as

must file a form 1-FR for each fiscal quarter of each fiscal year unless the registrant elects pursuant to paragraph (e)(2) of this section to file a form 1-FR for each calendar quarter of each calendar year. Each form 1FR must be filed no later than 45 days after the date for which the report is made: Provided, however, That any form 1-FR which must be certified by an independent public accountant pursuant to paragraph (b)(2) of this section must be filed no later than 90 days after the close of each registrant's fiscal year. This paragraph (b)(1) will be applicable to all fiscal quarters ending after the effective date of this section but in no event more than 90 days after such effective date.

(2) The form 1-FR filed pursuant to paragraph (b)(1) of this section as of the close of the registrant's fiscal year must be certified by an independent public accountant in accordance with § 1.16. A registrant who has elected to file its forms 1-FR for each calendar quarter of each calendar year pursuant to paragraph (e)(2) of this section, must nonetheless file a form 1-FR so certified as of the close of such registrant's fiscal year.

(3) The provisions of paragraphs (b)(1) and (b)(2) of this section may be met by any person registered as a futures commission merchant who is a member of a designated self-regulatory organization and conforms to minimum financial standards and related reporting requirements set by such designated self-regulatory organization in its bylaws, rules, regulations, or resolutions and approved after the effective date of these regulations by the Commission pursuant to section 4f(2) of the Act and § 1.52: Provided, however, That each such registrant shall promptly file with the Commission a true and exact copy of each financial report which it files with such designated tion.

self-regulatory organiza

(4) Upon receiving written notice from any representative of the Commission or any self-regulatory organization of which it is a member, an applicant or registrant must, monthly or at such times as specified, furnish the Commission and the self-regulatory

organization, if any, requesting such information with a form 1-FR and/or such other financial information as requested by the representative of the Commission or the self-regulatory organization. Each such form 1-FR or such other information must be furnished within the time period specified in the written notice.

(c) Where to file reports. The reports provided for in this § 1.10 will be considered filed when received by the regional office of the Commission nearest the principal place of business of the applicant or registrant and by the designated self-regulatory organization, if any; Provided, however, That information required of an applicant or registrant pursuant to paragraph (b)(4) of this section need be furnished only to the self-regulatory organization requesting such information and the Commission.

(d) Contents of financial reports. (1) Each form 1-FR filed pursuant to this § 1.10 which is not required to be certified by an independent public accountant must be completed in accordance with the instructions to the form and contain: (i) A statement of financial condition as of the date for which the report is made; (ii) a statement of changes in ownership equity for the period between the date of the most recent statement of financial condition filed with the Commission (or the beginning of the fiscal quarter immediately following the effective date of this rule but in no event more than 90 days after such effective date) and the date for which the report is made; (iii) a statement of the computation of the minimum capital requirements pursuant to § 1.17 and a schedule of segregation requirements and funds on deposit in segregation, as of the date for which the report is made; and (iv) in addition to the information expressly required, such further material information as may be necessary to make the required statements and schedules not misleading.

(2) Each form 1-FR filed pursuant to this § 1.10 which is required to be certified by an independent public accountant must be completed in accordance with the instructions to the form and contain: (i) A statement of financial condition as of the date for which