CFTC Proposes Alternative to Fingerprinting Foreign Natural Persons

The CFTC proposed amendments to its rules that would establish an alternative to the fingerprinting requirement that applies to foreign persons under the current registration application. The proposed amendment would affect the registration application for foreign persons to act as a futures commission merchant, retail foreign exchange dealer, introducing broker, commodity pool operator, commodity trading advisor, swap dealer, major swap participant or leverage transaction merchant market participant. The alternative procedure for compliance would apply to certain foreign persons (including principals) who are associated with various intermediaries registered with the CFTC.

Specifically, the CFTC proposed amendments to CFTC Rule 3.21 ("Exemption from Fingerprinting Requirement in Certain Cases"). The amendments would establish an alternative to fingerprinting for evaluating the fitness of natural persons who (i) otherwise would be required to submit fingerprints under Part 3 ("Registration") of CFTC regulations and (ii) have not resided in the U.S. since reaching 18 years of age. The proposed amendments state that the obligation to provide a fingerprint card for a foreign natural person would be deemed to be satisfied if (i) the intermediary employing such person initiated a criminal history background check; (ii) such background check did not reveal any matter that constituted a disqualification under CEA Section 8a(2) or 8a(3) ("Registration of Commodity Dealers and Associated Persons; Regulation of Registered Entities") other than those that were disclosed to the National Futures Association ("NFA"); and (iii) a person authorized by such firm submitted, in reliance on such background check, a certification by such firm to the NFA.

The CFTC elaborated that the proposal codifies CFTC Staff Letters 12-49 and 13-29 generally and, if adopted, would supersede those letters. The CFTC added, it also would extend the relief of such letters to certain natural persons connected to floor brokers and floor traders.