CFTC Final Rule: Designation of Chief Compliance Officer and Preparation of Annual Compliance Report

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Gavel.png FINAL RULE: The final rule on required compliance policies was approved at CFTC Open Meeting, February 23, 2012.
Dodd-Frank Timeline, Required Compliance Policies
Final Rule Issue Effective Date Compliance Date, Non-Covered Firms Compliance Date, Covered Firms
April 3, 2012 June 4, 2012 September 30, 2012 March 31, 2013

At its February 23, 2012 open meeting, the CFTC approved its first set of final internal business conduct standards for swap dealers and major swap participants. Among the provisions is a final rule regarding the designation, qualifications and duties of a chief compliance officer.

Note: On December 30, 2013, the CFTC issued two letters of no-action relief regarding annual compliance reports and duties of the Chief Compliance Officer. The first letter provides relief for swap dealers that: (1) are not required, prior to December 31, 2013, to register with the CFTC as swap dealers; and (2) have a fiscal year-end of December 31, 2013. (VIEW LETTER). The second letter provides relief to all futures commission merchants, swap dealers, and major swap participants concerning the deadline for furnishing a copy of the Annual Report to the CFTC. The no-action relief provided in that letter is limited to the Annual Report required to be furnished by such firms during calendar year 2014.[1] (VIEW LETTER)

Contents

Background

Section 731 of the Dodd-Frank Act amended the Commodity Exchange Act by adding a provision regarding the designation, qualifications and duties of the chief compliance officer (CCO) of swap dealers and major swap participants (SD/MSPs). A proposed rule was approved at a CFTC open meeting November 10, 2010.

Final Rule Summary

The final rule sets out the qualifications and duties of the CCO, and the required contents of the annual report that the CCO must file:

  • Qualifications include having the appropriate background to serve as CCO, to not be disqualified from membership, and must be listed as a "principal" of the SD/MSP.
  • Duties include establishing compliance policies, resolving of conflicts of interest, identifying noncompliance issues and establish procedures for the remediation of such noncompliance issues. All of the above duties (with the exception of ensuring compliance) are to be undertaken in consultation with the board of directors or the senior officer of the registrant.
  • Annual Report must contain a description of the registrant’s compliance, an assessment of the effectiveness of the registrant’s policies, a discussion of areas for improvement, a description of the resources set aside for compliance, and a description of any non-compliance issues identified and addressed.

Related Documents: Fact Sheet, Q&A, and Final Rule as it Appeared in the Federal Register

Note: The documents embedded below include the entire set of internal business conduct standards rules approved at the CFTC Open Meeting, February 23, 2012.

References

  1. DCFTC’s Division of Swap Dealer and Intermediary Oversight Issues No-Action Relief for Certain Futures Commission Merchants, Swap Dealers, and Major Swap Participants Concerning Annual Reports of Chief Compliance Officers. CFTC. Retrieved on January 20, 2014.

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