SELF REGULATORY ORGANIZATION DISCIPLINARY COMMITTEES AND GOVERNING BOARDS.

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 106 STAT. 3602 “(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— 106 STAT. 3603 (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 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 106 STAT. 3604 (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.