Commission pursuant to paragraph (a) of this section; or

(2) A person's actual unsold anticipated production or current unfilled anticipated requirements for the length of time specified in the information most recently filed pursuant to this section.

(e) Updated Reports. Reports updating the information required pursuant to this section shall also be filed with the Commission upon specific request. [42 FR 42752, Aug. 8, 1977]

§ 1.50 Demonstration of continued compliance with the requirements for contract market designation.

(a) With respect to each commodity for which it has been designated as a contract market, each board of trade shall file with the Commission within 60 days of a Commission request, or within such longer period as the Commission may specify in the request, a written report containing such supporting data, and other information and documents as the Commission may specify, that demonstrates that such contract market is complying with the conditions and requirements of sections 5 and 5a of the Act. At the discretion of the Commission, the information requested may be limited to certain conditions and requirements of sections 5 and 5a of the Act.

(b) Any failure by a contract market to continue to comply with the conditions and requirements for designation as a contract market as set forth in sections 5 and 5a of the Act, and any failure or refusal to file the information required by this regulation shall be cause for action by the Commission under sections 5b, 6(a), 6b, 6c, or 8a(7) of the Act (7 U.S.C. 7b, 8(a), 13a, 13a1, and 12a(7)).

(c) Upon showing of good cause by a contract market, the Commission may extend for a reasonable time the filing date for any report under this regulation.

(7 U.S.C. 7, 7a, 8, 13, 13a-1 and 12a (1976)) [43 FR 17814, Apr. 26, 1978]

§ 1.51 Contract market program for enforcement.

(a) Each contract market shall use due diligence in maintaining a con

tinuing affirmative action program to secure compliance with all of the provisions of Sections 5, 5a, 5b, 6(a), 6b, 8a(7), 8a(9) and 8c of the Act (7 U.S.C. 7, 7a, 7b, 8, 13a, 12a(7), 12a(9), and 12c) and with all of the contract market's bylaws, rules, regulations and resolutions which such contract market is required by the Act to enforce. Such program shall include:

(1) Surveillance of market activity for indication of possible congestion or other market situation conducive to possible price distortion;

(2) Surveillance of trading practices on the floor of such contract market;

(3) Examination of the books and records kept by contract market members relating to their business of dealing in commodity futures and cash commodities, insofar as such business relates to their dealing on such contract markets;

(4) Investigation of complaints received from customers concerning the handling of their accounts or orders;

(5) Investigation of all other alleged or apparent violation of such bylaws, rules, regulations and resolutions;

(6) Such other surveillance, record examination and investigation as is necessary to enforce such bylaws, rules, regulations and resolutions; and

(7) A procedure which results in the taking of prompt, effective disciplinary action for any violation which is found to have been committed.

(b) Each contract market shall keep full, complete, and systematic records which will clearly set forth all action taken as a part of, and as a result of, its program required under paragraph (a) of this section.

(Sec. 5a, 49 Stat. 1497; 7 U.S.C. 7a)

§ 1.52 Self-regulatory organization adoption and surveillance of minimum financial requirements.

(a) Each self-regulatory organization must adopt and submit for Commission approval, rules prescribing minimum financial and related reporting requirements for all its members who are registered futures commission merchants and shall submit for Commission approval any modification or other amendments to such rules. Such requirements must be the same as, or

more stringent than, those contained in §§ 1.10 and 1.17, and the definition of adjusted net capital must be the same as that prescribed in § 1.17(c): Provided, however, A designated selfregulatory organization may determine the number of form 1-FR's it receives from its member registrants so long as it requires at least semiannual Form 1-FR's, one of which must be certified in accordance with § 1.16 for each such registrant; Provided, further, A designated self-regulatory organization may permit its member registrants which are registered with the Securities and Exchange Commission as securities brokers or dealers to file (in accordance with § 1.10(h)) a copy of their Financial and Operational Combined Uniform Single Report under the Securities Exchange Act of 1934, Part II, in lieu of Form 1-FR.

(b) Each self-regulatory organization shall have in effect and enforce rules submitted to the Commission pursuant to paragraph (a) of this section and approved by the Commission.

(c) Any two or more self-regulatory organizations may file with the Commission a plan for delegating to a designated self-regulatory organization, for any registered futures commission merchant which is a member of more than one such self-regulatory organization, the responsibility of:

(1) Monitoring and auditing for compliance with the minimum financial and related reporting requirements adopted by such self-regulatory organizations in accordance with paragraph (a) of this section; and

(2) Receiving the financial reports necessitated by such minimum financial and related reporting requirements.

Such a plan may also delegate the responsibility of examining the books and records kept by such registered futures commission merchant relating to its business of dealing in commodity futures and cash commodities, insofar as such business relates to its dealing on contract markets, as required by § 1.51(a)(3).

(d) Any plan filed under this § 1.52 may contain provisions for the allocation of expenses reasonably incurred by the designated self-regulatory organization among the self-regulatory or

ganizations participating in such a plan.

(e) A plan's designated self-regulatory organization must report to that plan's other self-regulatory organizations any violation of such other selfregulatory organizations' rules and regulations for which the responsibiity to monitor, audit or examine has been delegated to such designated self-regulatory organization under this § 1.52.

(f) The self-regulatory organizations may, among themselves, establish programs to provide access to any necessary financial or related information.

(g) After appropriate notice and opportunity for comment, the Commission may, by written notice, approve such a plan, or any part of the plan, if it finds that the plan, or any part of it: (1) Is necessary or appropriate to serve the public interest; (2) is for the protection and in the interest of customers; (3) reduces multiple monitoring and auditing for compliance with the minimum financial rules of the selfregulatory organizations submitting the plan for any futures commission merchant which is a member of more than one self-regulatory organization; (4) reduces multiple reporting of the financial information necessitated by such minimum financial and related reporting requirements by any futures commission merchant which is a member of more than one self-regulatory organization; (5) fosters cooperation and coordination among the contract markets; and (6) does not hinder the development of a registered futures association under section 17 of the Act.

(h)(1) Upon the approval of a plan or part of one under § 1.52(g), a selfregulatory organization which is included in such a plan shall be considered to have met its affirmative action responsibilities under § 1.51 to the extent that such responsibilities have been delegated to a designated selfregulatory organization.

(2) After the Commission has approved a plan or part of one under § 1.52(g), a self-regulatory organization relieved of responsibility must notify each of its members which is subject to such a plan: (i) Of the limited nature of its responsibility for such a member's compliance with its mini

mum financial and related reporting requirements; and (ii) of the identity of the designated self-regulatory organization which has been delegated responsibility for such a member.

(i) The Commission may at any time, after appropriate notice and opportunity for hearing, withdraw its approval of any plan or part of one established under this § 1.52, if such plan or part of one ceases to effectuate adequately the purposes of section 4f(2) of the Act or of this § 1.52.

(j) Whenever a registered futures commission merchant holding membership in a self-regulatory organization ceases to be a member in good standing of that self-regulatory organization, such self-regulatory organization must, on the same day that event takes place, give telegraphic notice of that event to the principal office of the Commission in Washington, D.C., send a copy of that notification to such futures commission merchant.

(k) Nothing in this § 1.52 shall preclude the Commission from examining any futures commission merchant for compliance with the minimum financial and related reporting requirements to which such futures commission merchant is subject.

(1) In the event a plan is not filed and/or approved for each registered futures commission merchant which is a member of more than one self-regulatory organization, the Commission may design and, after notice and opportunity for comment, approve a plan for those futures commission merchants which are not the subject of an approved plan (under paragraph (g) of this section), delegating to a designated self-regulatory organization the responsibilities described in paragraph (c) of this section.

(7 U.S.C. 6c, 6d, 6f, 6g, 7a, 12a, 19, and 21; 5 U.S.C. 552, 5 U.S.C. 552b, and secs. 2(a)(11), 4b, 4f, 4g, 5a, 8a, and 17 of the Commodity Exchange Act, 7 U.S.C. 4a(j), 6b, 6f, 6g, 7a, 12a, and 21, as amended, 92 Stat 865 et seq.) [43 FR 39981, Sept. 8, 1978, as amended at 45 FR 2023, Jan. 10, 1980]

§ 1.53 Enforcement of contract market bylaws, rules, regulations, and resolutions.

Each contract market shall enforce each bylaw, rule, regulation, and reso

lution, made or issued by it or by the governing board thereof or any committee thereof, which is in effect as of July 18, 1975, and which relates to terms and conditions in contracts of sale to be executed on or subject to the rules of such contract market or relates to other trading requirements, unless such bylaw, rule, regulation, or resolution has been disapproved by the Commission pursuant to section 5a(12) of the Act, or the amendment or revocation of such bylaw, rule, regulation or resolution has been approved by the Commission pursuant to section 5a(12) of the Act.

(Secs. 5, 5a, 6, 6b; 42 Stat. 1000, 1001, 49 Stat. 1497, 1498, 82 Stat. 29, 30, 31, 88 Stat. 1392, 1400, 1401, 1402; 7 U.S.C. 7, 7a, 8, 13a)

§ 1.54 Contract market rules submitted to

and approved or not disapproved by the Secretary of Agriculture. Notwithstanding any provision of these rules, any bylaw, rule, regulation, or resolution of a contract market that was submitted to the Secretary of Agriculture pursuant or §§ 1.38(a) of 1.39(a) of these rules, and was either approved by the Secretary or not disapproved by him, as of April 21, 1975, shall continue in full force and effect unless and until disapproved, altered or supplemented by or with the approval of the Commission. The adoption of this rule does not constitute approval by the Commission of any contract market bylaw, rule, regulation or resolution.

(Sec. 411, Pub. L. 93-463, 88 Stat. 1414; 7 U.S.C. 4a note)

[45 FR 2314, Jan. 11, 1980]

§ 1.55 Distribution of "Risk Disclosure Statement" by futures commission merchants.

(a) No futures commission merchant may open a commodity futures account for a customer unless the futures commission merchant first (1) furnishes the customer with a separate written disclosure document containing only the language set forth in paragraph (b) of this section (except for nonsubstantive additions, e.g., captions) and (2) receives from the customer an acknowledgment signed and dated by the customer that he re

Iceived and understood the disclosure document.

(b) The language set forth in the written disclosure document required by paragraph (a) of this section shall be as follows:

RISK DISCLOSURE STATEMENT

This statement is furnished to you because rule 1.55 of the Commodity Futures Trading Commission requires it.

The risk of loss in trading commodity futures contracts can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. In considering whether to trade, you should be aware of the following:

(1) You may sustain a total loss of the initial margin funds and any additional funds that you deposit with your broker to establish or maintain a position in the commodity futures market. If the market moves against your position, you may be called upon by your broker to deposit a substantial amount of additional margin funds, on short notice, in order to maintain your position. If you do not provide the required funds within the prescribed time, your position may be liquidated at a loss, and you will be liable for any resulting deficit in your account.

(2) Under certain market conditions, you may find it difficult or impossible to liquidate a position. This can occur, for example, when the market makes a “limit move."

(3) Placing contingent orders, such as a "stop-loss" or "stop-limit" order, will not necessarily limit your losses to the intended amounts, since market conditions may make it impossible to execute such orders.

(4) A "spread" position may not be less risky than a simple "long" or "short" position.

(5) The high degree of leverage that is often obtainable in futures trading because of the small margin requirements can work against you as well as for you. The use of leverage can lead to large losses as well as gains.

This brief statement cannot, of course, disclose all the risks and other significant aspects of the commodity markets. You should therefore carefully study futures trading before you trade.

(c) The acknowledgment required by paragraph (a) of this section must be retained by the futures commission merchant in accordance with § 1.31.

(Secs. 4b, 4c(b), 4g(1), 41, 40, and 8a(5), Commodity Exchange Act, 7 U.S.C. 6b, 6c(b), 6g(1), 67, 60, and 12a(5)(1976), and sec. 217, Commodity Futures Trading Act of 1974, 88 Stat. 1405)

[43 FR 31890, July 24, 1978]

§ 1.60 Pending legal proceedings.

(a) Every contract market shall submit to the Commission copies of the complaint and answer (whether or not formally characterized as such) and such further documents as the Commission may thereafter request, filed in any material legal proceedings to which the contract market is a party or its property or assets is subject.

(b) Every contract market shall submit to the Commission copies of the complaint and answer (whether or not formally characterized as such) and such further documents as the Commission may thereafter request, filed in any material legal proceedings instituted against any officer, director, or other official of the contract market, arising from conduct in such person's capacity as a contract market official and alleging violations of (1) the Act or any rule, regulation, or order thereunder; (2) the constitution, bylaws or rules of the contract market; or (3) the applicable provisions of state law relating to the duties of officers, directors, or other officials of business organizations.

(c) Every contract market shall notify the Commission in writing of any proceedings known to the contract market to be contemplated against the contract market by governmental authorities, other than investigations or enforcement actions which may be instituted by the Commission. To the extent that such information is available, the notification must include the name of the court or agency in which the proceedings may be brought; the anticipated date of the institution of the proceedings; the principal parties (including any officers, directors or other officials of the contract market) which may be bringing or named in the proceedings; a description of the factual and legal basis which may be alleged to underlie the proceedings and the relief which may be sought therein. If proceedings are later instituted against the contract market by governmental authorities, the contract market shall submit to the Commission copies of the complaint and answer (whether or not formally char

S

acterized as such) and such further documents as the Commission may thereafter request, filed in such proceedings.

(d) Every contract market shall notify the Commission if any officer, director or other official of the contract market is to be indemnified by the contract market for any amounts paid as settlements or judgments or amounts paid as fines or penalties in any legal proceeding referred to in paragraphs (a), (b), and (c) of this section. The notification must include information regarding the nature and amount of any such indemnification and a brief statement explaining the reasons why the official is to be indemnified for such liabilities.

(e) The documents required by this section shall be mailed to the CommisD sion's headquarters in Washington, D.C. within 10 days after the effective date (February 15, 1977) of this section as to all matters referred to in paragraphs (a), (b), and (c) of this section then pending, within 10 days after the initiation of legal proceedings referred to in paragraphs (a) and (b) of this section, within 10 days after the contract market determines to indemnify a contract market official as provided in paragraph (d) of this section, and within 10 days after the contract market becomes aware of the contemplated proceedings and within 10 days after formal initiation of any contemplated proceedings referred to in paragraph (c) of this section. For purposes of paragraphs (a) and (b) of this section, legal proceedings are not "material" if the only relief sought is a money judgment for less than $15,000.

Pursuant to section 2(a)(10) of the Commodity Exchange Act, as amended, 7 U.S.C. 4(1), the Commodity Futures Trading Commission has adopted an official seal (the "Seal"), the description of which is as follows:

(a) An American bald eagle in black and white holding the scales of balanced interests over a black and white wheel of commerce and a farmer's plow, also in black and white. These symbols are enclosed with an inner red octagon and a blue outer octagon representing traditional futures contract trading pits. Around the outside of the octagons are the words "Commodity Futures Trading Commission" separated by two stars from the year "1975," the first year of the Commission's existence.

(b) The Seal of the Commodity Futures Trading Commission is illustrated as follows:

FUTURES T

TRADING

* 1975 ✩

COMMISSION