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Final Rules on Associated Persons of Swap Dealers and MSPs Issued by CFTC
Practical Law Legal Update 9-525-5727 (Approx. 3 pages)
Final Rules on Associated Persons of Swap Dealers and MSPs Issued by CFTC
by PLC Finance
| Published on 04 Apr 2013 • USA (National/Federal) |
The CFTC has issued final rules under the Dodd-Frank Act regarding associated persons (APs) of swap dealers (SDs), major swap participants (MSPs) and other CFTC registrants.
On March 29, 2013, the CFTC issued final rules that impose liability on swap dealers (SDs), major swap participants (MSPs) and other CFTC registrants for certain actions of their "associated persons" (APs). APs are natural persons who are partners, officers, employees and agents who solicit or accept swaps for SDs, MSPs and other CFTC registrants or supervise another in doing so. The final rules allow dual and multiple associations of unregistered APs associated with SDs, MSPs and other CFTC registrants, but require these entities to supervise the AP and be jointly and severally responsible for the AP's activities with respect to customers common to it and any other SD, MSP or other CFTC registrant.
APs are natural persons who are associated with an SD, MSP or other CFTC registrant as a partner, officer, employee or agent (or any natural person with a similar status or function) in a capacity that involves either:
- The solicitation or acceptance of swaps (other than in a clerical or ministerial capacity).
- The supervision of any person so engaged.
Unlike APs of other CFTC registrants, APs of SDs and MSPs are not required to register with the CFTC under the Dodd-Frank Act. However, Dodd-Frank provides that only registered APs may serve as APs for more than one entity, known as dual and multiple association. Nevertheless, the final rules also allow dual and multiple associations of unregistered APs with SDs, MSPs and other CFTC registrants such as:
- Futures commission merchants (FCMs).
- Retail foreign exchange dealers (RFEDs).
- Introducing brokers (IBs).
- Commodity trading advisors (CTAs).
- Commodity pool operators (CPOs).
- Leverage transaction merchants (LTMs).
The rules require these entities to supervise the AP and be jointly and severally responsible for the AP's activities with respect to customers common to it and any other SD, MSP or other CFTC registrant. The rules apply in situations where a natural person is:
- An AP of one or more SDs or MSPs who is seeking to become a registered AP of one or more other CFTC registrants.
- An AP of an SD or MSP who is seeking to become an AP of one or more additional SDs or MSPs.
- A registered AP of one or more non-SD, non-MSP CFTC registrants who is seeking to become an AP of one or more SDs or MSPs.
The final rules require all SDs, MSPs and other CFTC registrants to:
- Supervise the AP.
- Be jointly and severally responsible for the activities of the AP with respect to customers common to it and any other SD, MSP or other CFTC registrant.
The CFTC adopted the final rules as proposed. The final rules take effect on June 7, 2013.
For information on which entities are SDs and MSPs under Title VII of the Dodd-Frank Act, see Practice Note, Is Your Client a Swap Dealer or Major Swap Participant? Breakdown of Final Dodd-Frank Definitional Rulemaking.
To learn more about the regulation of SDs and MSPs, see Dodd-Frank Quick & Easy: Requirements for Swap Dealers and MSPs.