further presentation of information and views concerning any matters by any or all such persons. The oral hearing may be held before the Commission or any person designated by the Commission, which person shall cause all evidence to be reduced to writing and forthwith transmit the same and a recommended decision to the Commission. The Commission's directive under paragraph (f) of this section shall remain in effect unless and until modified or withdrawn by the Commission.

(h) If, during the course of or after the Commission acts pursuant to paragraph (f), the Commission determines that it is appropriate to undertake a proceeding pursuant to section 6(b) of the Commodity Exchange Act, 7 U.S.C. 9, the Commission shall issue a complaint in accordance with the requirements of section 6(b), and, upon further determination by the Commission that the conditions described in § 21.03(c) still exist, a hearing pursuant to section 6(b) of the Act shall commence no later than five business days after service of the complaint. In the event the futures commission merchant or customer served with the complaint under section 6(b) has, prior to the commencement of the section 6(b) hearing, sought a hearing pursuant to paragraph (g) above and the Commission has determined to accord him such a hearing, the two hearings shall be conducted simultaneously. Nothing in this section shall preclude the Commission from taking other appropriate action under the Commodity Exchange Act or the Commission's Rules, including action under section 6(b) of the Act, regardless of whether the conditions described in § 21.03(c) still exist, and no ruling issued in the course of a hearing pursuant to paragraph (g) or this paragraph shall constitute an estoppel against the Commission in any other action.

(Approved by the Office of Management and Budget under control number 30380009)

[46 FR 63036, Dec. 30, 1981, and 47 FR 45001, Oct. 13, 1982, as amended at 48 FR 35301, Aug. 3, 1983]

PART 30-FRAUD IN CONNECTION WITH COMMODITY TRANSACTIONS

§ 30.02 Fraud in connection with transaction in futures contracts other than on domestic contract markets.

It shall be unlawful for any person, by use of the mails or by any means or instrumentality of interstate commerce, directly or indirectly, in or in connection with any account, agreement or transaction involving any contract of sale of a commodity for future delivery, traded or executed on any board of trade, exchange or market other than a contract market designated pursuant to section 5 of the Act, as amended:

(a) To cheat or defraud or attempt to cheat or defraud any other person;

(b) To make or cause to be made to any other person any false report or statement thereof or to enter or cause to be entered for any person any false record thereof;

(c) To deceive or attempt to deceive any other person by any means whatsoever in regard to any such account, agreement or transaction or the disposition or execution of any such account, agreement or transaction or in regard to any act of agency performed with respect to such account, agreement or transaction; or

(d) To bucket any order, or to fill any order by offset against the order or orders of any other person or without the prior consent of any person to become the buyer in respect to any selling order of such person, or become the seller in respect to any buying order of such person.

(Secs. 2(a), 4c, and 8a, 42 Stat. 998, 49 Stat. 1494, 1500, as amended by 49 Stat. 1401, 52 Stat. 205, 54 Stat. 1059, 68 Stat. 913, 69 Stat. 375, 82 Stat. 26, 413, 88 Stat. 1392, 1395, 1412, and secs. 2, 23, and 24 of Pub. L. 95405 (92 Stat. 865, 876-877); 7 U.S.C. 2, 6c, and 12a)

[41 FR 3211, Jan. 21, 1976]

PART 31-LEVERAGE TRANSACTIONS

Sec.

31.1 Temporary moratorium on the offer and sale of certain transactions for the delivery of gold or silver bullion or bulk coins.

§ 31.1 Temporary moratorium on the offer and sale of certain transactions for the delivery of gold or silver bullion or bulk coins.

(a) Until the Commission by rule, regulation or order determines otherwise, it shall be unlawful for any person, by use of the mails or any means or instrumentality of interstate commerce, to engage in the business of offering to enter into, entering into or confirming the execution of, any transaction for the delivery of silver bullion, gold bullion, bulk silver coins or bulk gold coins in the United States under a standardized contract commonly known to the trade as a margin

account, margin contract, leverage account or leverage contract, or under any contract, account, agreement, scheme, or device that serves the same function or functions as such a standardized contract, or that is marketed or managed in substantially the same manner as such a standardized contract, who was not engaged in that business on June 1, 1978.

(b) The Commission may, in its discretion, grant an exemption from the provisions of paragraph (a) of this section to any person who can demonstrate to the Commission's satisfaction that: (1) Prior to June 1, 1978, the person had invested substantial resources to develop a business referred to in paragraph (a) of this section, (2) the business will be conducted in a manner that may reasonably be expected to insure the financial solvency of the contracts to be offered and sold and to prevent manipulation and fraud, and (3) the manner in which the business will be conducted will present no substantial risk to the public and will otherwise be consistent with the public interest.

(7 U.S.C. 2, 12a(5) (1976); as amended, Pub. L. No. 95-405, secs. 2 and 23, 92 Stat. 865, 876)

[43 FR 56887, Dec. 5, 1978]

§ 31.2 Temporary moratorium on the offer and sale of certain transactions for the delivery of commodities other than gold or silver bullion or bulk coins. (a) Until the Commission by rule, regulation or order determines otherwise, it shall be unlawful for any person, by use of the mails or any means or instrumentality of interstate commerce to engage in the business of offering to enter into, entering into, or confirming the execution of, any transaction for the delivery of any commodity other than gold and silver bullion or bulk coins in the United States under a standardized contract commonly known to the trade as a margin account, margin contract, leverage account or leverage contract or under any contract, account, agreement, scheme, or device that serves the same function or functions as such a standardized contract, or that is marketed or managed in substantially

the same manner as such a standardized contract, who was not engaged in that business on February 2, 1979.

(b) The Commission may, in its discretion, grant an exemption from the provisions of paragraph (a) of this section to any person who can demonstrate to the Commission's satisfaction that: (1) Prior to February 2, 1979, the person had invested substantial resources to develop a business referred to in paragraph (a) of this section, (2) the business will be conducted in a manner that may reasonably be expected to ensure the financial solvency of the contract to be offered and sold and to prevent manipulation or fraud, and (3) the manner in which the business will be conducted will present no substantial risk to the public and will otherwise be consistent with the public interest.

(7 U.S.C. 12a, (1976); as amended, Pub. L. 95-405, secs. 2 and 23, 92 Stat. 865, 876-877) [44 FR 55824, Sept. 28, 1979]

§ 31.3 Fraud in connection with certain transactions in silver or gold bullion or bulk coins, or other commodities.

It shall be unlawful for any person, by use of the mails or any means or instrumentality of interstate commerce, directly or indirectly:

(a) To employ any device, scheme, or artifice to defraud,

(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made in the light of the circumstances under which they were made, not misleading, or

(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in, or in connection with (1) an offer to make or the making of, any transaction for the purchase, sale or delivery of silver bullion, gold bullion, bulk silver coins, bulk gold coins, or any other commodity pursuant to a standardized contract commonly known to the trade as a margin account, margin contract, leverage account, or leverage contract, or pursuant to any contract, account, arrangement, scheme, or device that serves the same function or functions as such a standardized contract, or is marketed or managed in substantially

the same manner as such a standardized contract, or (2) the maintenance or carrying of any such contract.

The provisions of this section shall not apply to any transaction expressly prohibited by section 19(a) of the Act. (Secs. 2(a), 8a, and 19 of the Commodity Exchange Act and secs. 2 and 23 of Pub. L. 95405 (92 Stat. 865, 870-871); 7 U.S.C. 2 and 12a)

[43 FR 58554, Dec. 15, 1978. Redesignated at 49 FR 5526, Feb. 13, 1984]

§ 31.4 Definitions.

For the purposes of this part: (a)-(b) [Reserved]

(c) "Promotional material” includes: (1) Any text of a standard oral presentation, or any communication for publication in any newspaper, magazine or similar medium or for broadcast over television, radio, or other electronic medium which is disseminated or directed to a leverage customer or prospective leverage customer;

(2) Any standardized form of report, letter, circular, memorandum, or publication which is disseminated or directed to a leverage customer or prospective leverage customer; or

(3) Any other written literature or advice disseminated or directed to a leverage customer or prospective leverage customer for the purpose of soliciting the entry into a leverage contract;

(d) "Leverage customer" means any person who, directly or indirectly, enters into, purchases, sells, or otherwise acquires for value any interest in a leverage contract with, from or to a leverage transaction merchant: Provided, however, That an owner or holder of a proprietary leverage account as defined in paragraph (e) of this section shall not be deemed to be a customer within the meaning of §§ 31.11(a)-(j) and (1), 31.12 and 31.26, and such an owner or holder of such a proprietary leverage account shall otherwise be deemed to be a leverage customer within the meaning of all other sections of these rules.

(e) "Proprietary leverage account" means a leverage account carried on the books and records of an individual, a partnership, corporation or other type association (1) for one of the fol

lowing 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 the trades of leverage customers or of the leverage customer funds of such partnership,

(C) The keeping of records pertaining to the trades of leverage customers or to the leverage customer funds 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 the trades of leverage customers or of the leverage customer funds of such individual, partnership, corporation or association,

(C) The keeping of records pertaining to the trades of leverage customers or to the leverage customer funds 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 association.

(f) "Commercial leverage account" means an account of a commercial enterprise, such as a producer, processor, dealer or end user of a leverage commodity which is the subject of a leverage contract, or the products or byproducts thereof;

(g) "Leverage commodity" means a commodity which is the subject of a leverage contract offered for purchase or sale, or purchased or sold, by a particular leverage transaction merchant, the value of which is reflected in a widely accepted and broadly disseminated commercial or retail cash price series for cash market transactions, which price series reasonably reflects the price for the leverage commodity which the customer can expect to pay or receive in normal commercial or retail market channels, including, if applicable, specified premiums or discounts; each leverage commodity is defined by reference to the following distinguishing characteristics:

(1) For gold and silver bullion and gold and silver bulk coins:

(i) The nominal size, composition and tolerable ranges of the delivery pack or the actual size, composition and tolerable range of the component of the delivery pack;

(ii) Minimum guaranteed quality, deliverable countries of origin, deliverable markings or imprints, and deliverable refiners or mints;

(iii) The method of pricing; and

(iv) The delivery specifications or alternatives including type and location of delivery facilities, packaging, transportation, registration and associated costs.

(2) For platinum, electrolytic copper cathodes, electrolytic copper in wire bars, cakes, slabs, billets, ingots or ingot bars, for lake copper in the same forms, for fire-refined copper in the same forms, and for fire-refined high conductivity copper in ingots or ingot bars, the same distinguishing characteristics as set forth in § 31.4(g)(1) apply.

(3) For Deutsche marks, Japanese yen, Swiss, francs, and British pounds:

(i) The amount and country of origin;

(ii) The delivery specifications or alternatives including:

(A) The manner of delivery and delivery point if hand-to-hand currency: (B) The manner of delivery, delivery point, bank and branch on which drawn, and type of draft if bank draft;

or

(C) The required payment instructions if a deposit to a leverage customer's foreign demand account for a long leverage contract or a deposit to a leverage transaction merchant's foreign demand account for a short leverage contract.

(h) "Ask price of a leverage contract" means the price at which a leverage transaction merchant sells or is willing to sell a long leverage contract to a leverage customer or the price at which a leverage transaction merchant resells or is willing to resell a short leverage contract to a leverage customer;

(i) "Bid price of a leverage contract" means the price at which a leverage transaction merchant purchases or is willing to purchase a short leverage contract from a leverage customer, or the price at which a leverage transaction merchant repurchases or is willing to repurchase a long leverage contract from a leverage customer;

(j) "Bid-ask spread of a leverage contract" means the difference between a leverage transaction merchant's ask price and bid price;

(k) "Initial charges for a leverage contract" includes all fees and commissions payable to a leverage transaction merchant which are incurred when a leverage contract is initially entered into by a leverage customer;

(1) “Carrying charges for a leverage contract" includes all service and interest changes paid periodically by a leverage customer to a leverage transaction merchant, or accrued by a leverage transaction merchant, while a long leverage contract remains open, or all service and interest charges paid periodically by a leverage transaction merchant to a leverage customer, or accrued by a leverage customer, while a short leverage contract remains open;

(m) "Termination charges for a leverage contract" includes all fees and commission payable to a leverage transaction merchant which are associated with the liquidation, repurchase, resale or settlement by delivery on a leverage contract;

(n) "Liquidation of a leverage contract" means the unilateral termination of a leverage contract by a leverage transaction merchant due to a leverage customer's failure to meet one or more margin calls or to make other required deposits on a timely basis or as otherwise permitted under § 31.18;

(0) "Repurchase or resale of a leverage contract" means the voluntary termination of a leverage contract by mutual agreement between the leverage customer and the leverage transaction merchant, which agreement is effected by entering into a transaction which is the opposite of the initial transaction. A repurchase by a leverage transaction merchant takes place if the initial transaction by the leverage customer was a purchase of a long leverage contract from the leverage transaction merchant, and a resale by a leverage transaction merchant takes place if the initial transaction by the leverage customer was a sale of a short leverage contract to the leverage transaction merchant;

(p) "Delivery on a leverage contract" means the making (in the case of an initial sale by a leverage customer) or taking (in the case of an initial purchase by a leverage customer) of delivery by a leverage customer of the commodity subject to a leverage contract;

(q) "Initial leverage margin" means the amount of funds, excluding initial charges, which a leverage customer is required to deposit with a leverage transaction merchant when entering into a leverage contract;

(r) "Minimum leverage margin" means the amount of funds which a leverage transaction merchant requires a leverage customer to maintain on deposit for each open leverage contract in the leverage customer's account.

(s) "Maintenance leverage margin" means the level to which the funds in a leverage customer's account must be restored after a margin call to the le