CFTC Final Rule: Dual and Multiple Associations of Persons Associated With Swap Dealers, Major Swap Participants and Other Commission Registrants
|FINAL RULE: Approved April 8, 2013; effective June 7, 2013|
|Proposal Date||Final Rule Issue||Effective Date|
|June 15, 2012||April 8, 2013||June 7, 2013|
On April 8, 2013, a CFTC final rule was published in the Federal Register that clarifies certain supervisory responsibilities of swap dealers and major swap participants.<ref>Dual and Multiple Associations of Persons Associated With Swap Dealers, Major Swap Participants and Other Commission Registrants. Federal Register. Retrieved on June 15, 2012.</ref> Under the rule, each swap dealer (SD), major swap participant (MSP), and other Commission registrant with whom an associated person (AP) is associated (such as CTAs, CPOs and introducing brokers) is required to supervise the AP and is jointly and severally responsible for the activities of the AP with respect to customers common to it and any other SD, MSP or other Commission registrant.
The Dodd-Frank Act prohibits any person from acting as a swap dealer or major swap participant (SD/MSP) unless such person is registered with the CFTC. The final SD/MSP registration rule was approved at the CFTC Open Meeting, January 11, 2012.
However, Dodd-Frank did not direct the commission to require the registration of associated persons (APs) of SD/MSPs. In the comment letters from the proposed rules on SD/MSP registration, the issue of dual and multiple associations was introduced. In the final rulemaking, the commission said it anticipated addressing the issue in a future rulemaking.
On June 15, 2012, the CFTC proposed a rule clarifying the dual and multiple registration issue. In the ensuing comment period, the commission received only one letter that essentially agreed with the commission's rule as proposed. The final rule essentially adopts the rules as proposed in June 2012.
Summary of the Final Rule
The rule is modeled after Regulation 3.12, which requires the filing of Form 8-R for each AP, and a certification from the person's "sponsor" - the futures commission merchant, retail foreign exchange dealer, introducing broker, commodity trading advisor, commodity pool operator or leverage transaction merchant under which the applicant is employed. Under Reg. 3.12, each sponsor of the AP is required to supervise the AP, and that each sponsor is jointly and severally responsible for the AP’s activities with respect to any customers common to it and any other sponsor with which the AP is associated.
The final rule makes clear that each SD, MSP and other commission registrant with whom the AP is associated is required to supervise the AP and is jointly and severally responsible for the activities of the AP with respect to customers common to it and any other SD, MSP or other Commission registrant.
Related Document: Final Rule as it Appeared in the Federal Register