CFTC Staff Letter 97-01: Applicability of Commodity Futures Regulations to Gold Coin and Bullion Transactions

97-01
CFTC Letter No. 97-01
December 12, 1996
Division of Trading & Markets
Re: Section 4(a): Applicability of Commodity Futures Regulations to Transactions Involving Gold Coins and Gold Bullion Dear :
This is in response to your letter dated September 24, 1996 to the Division of Trading and Markets ("Division") of the Commodity Futures Trading Commission ("Commission"), as supplemented by telephone conversations with Division staff. You raise several questions concerning the applicability of the Commodity Exchange Act1 (the "Act") to transactions involving gold coins and gold bullion. Based upon your letter and subsequent telephone conversations, we understand the pertinent facts to be as follows. You are a financial planner and currently hold Series 7 and 63 licenses. Your firm is an NASD member, and you employ eight individuals, all of whom hold a Series 6 or Series 7 license. You inquire as to whether gold coins and gold bullion are considered "commodities" under the Commodity Exchange Act. You also ask whether a general securities representative may sell gold coins and/or gold bullion to another person without being subject to the Commission's jurisdiction under the Act. Finally, you ask whether a general securities representative may sell to a customer gold coins which he has purchased from a wholesaler and collect a "mark-up" or commission on the sale. The term "commodity" is defined in Section 1a(3) of the Act to include various enumerated items as well as, among other things, "all other goods and articles, except onions . . . ." Gold is a commodity within this definition. Whether a general securities representative, or any person may sell gold coins and/or gold bullion to another person without being subject to the Commission's jurisdiction depends upon whether the transaction involves a futures contract or a commodity option. If the transaction is a futures contract or a commodity option, it is required, with few exceptions, to be conducted on a regulated futures exchange, and in accordance with the regulatory structure administered by the Commission.2 Registration of a sales agent as a securities representative would not constitute regulatory compliance. The term "contract for the purchase or sale of a commodity for future delivery," commonly known as a "futures contract," is not specifically defined in the Act or Commission regulations promulgated thereunder. However, based upon various definitions provided in Section 1a of the file:///S|/Website%20Management/LegacyDataCopyasof2010-04-21/tm/letters/97letters/tm97-01.htm (1 of 4) [5/6/2010 7:34:47 PM]