Annual Dodd-Frank CCO Reports: CFTC Offers Guidance and More Time | Practical Law

Annual Dodd-Frank CCO Reports: CFTC Offers Guidance and More Time | Practical Law

The CFTC has issued a no-action letter providing an additional 30 days to certain swap dealers, MSPs and FCMs for the filing of the annual CCO Dodd-Frank compliance report required under CFTC Regulation 3.3. The CFTC also issued an advisory providing guidance for CCOs on preparing the annual report.

Annual Dodd-Frank CCO Reports: CFTC Offers Guidance and More Time

Practical Law Legal Update 0-593-9125 (Approx. 4 pages)

Annual Dodd-Frank CCO Reports: CFTC Offers Guidance and More Time

by Practical Law Finance
Published on 25 Dec 2014 • USA (National/Federal)
The CFTC has issued a no-action letter providing an additional 30 days to certain swap dealers, MSPs and FCMs for the filing of the annual CCO Dodd-Frank compliance report required under CFTC Regulation 3.3. The CFTC also issued an advisory providing guidance for CCOs on preparing the annual report.
On December 22, 2014, the CFTC issued No-action Letter 14-154 (No-action 14-154), which grants relief to certain futures commission merchants (FCMs), swap dealers (SDs) and major swap participants (MSPs) (collectively, registrants) on the timing of the filing of their Dodd-Frank chief compliance officer (CCO) annual reports required under CFTC Regulation 3.3(e) (17 C.F.R. 3.3(e)).
No-action 14-154 grants registrants that have a fiscal year ending on or before January 31, 2015 an additional 30 days (for a total of 90 days) to provide the CFTC with their annual reports. Firms that cannot comply within this extended 90-day period may furnish the report up to 120 days after the end of the fiscal year as long as they inform the CFTC's Division of Swap Dealer and Intermediary Oversight (DSIO) within those 90 days of any material noncompliance events that occurred during the fiscal year that is the subject of the report.
The annual CCO compliance report must cover the registrant's Dodd-Frank compliance programs for the registrant's most recently completed fiscal year and must be provided to the firm's board of directors or senior officer, as well as to the CFTC. Under Regulation 3.3(f) (17 C.F.R. 3.3(f)) annual CCO reports must be furnished to the CFTC within 60 days after the end of the registrant's fiscal year. For further information on the requirements of Regulation 3.3, see Legal Update, CFTC Issues Relief on 2014 Dodd-Frank CCO Reports.
The relief granted in No-action 14-154 is similar to the relief the CFTC granted last year. In December 2013, the CFTC issued No-action Letter 13-84 (No-action 13-84), which extended the deadline for filing a CCO annual report during the calendar year 2014 under Regulation 3.3(f)(2) from 60 to 90 days following the end of the fiscal year of the SD, MSP or FCM in order to align the timing of those reports with reports required of broker-dealer FCMs by FINRA and certain exchanges. That same day, the CFTC also issued No-action Letter 13-85 (No-action 13-85), which relieved the obligation to file a CCO annual report if the report would include only information for December 31, 2013. For further information on the relief extended under No-action 13-84 and No-action 13-85, see Legal Update, CFTC Issues Relief on 2014 Dodd-Frank CCO Reports.
Separately, also on December 22, 2014, the CFTC issued Staff Advisory No. 14-153 for CCOs of SDs, MSPs and FCMs on preparing the annual CCO report. At a minimum, the report must:
  • Describe the firm's written policies and procedures, including its code of ethics and conflicts-of-interest policies.
  • Review each applicable requirement under the Commodity Exchange Act and CFTC Regulations, and with respect to each:
    • identify the policies and procedures that are reasonably designed to ensure compliance;
    • assess the effectiveness of these policies and procedures;
    • discuss areas for improvement; and
    • recommend potential or prospective changes or improvements to the compliance program and its earmarked resources.
  • List any material changes to compliance policies and procedures during the period covered by the report.
  • Describe the financial, managerial, operational and staffing resources set aside for compliance with respect to the CEA and CFTC Regulations, including any material deficiencies in such resources.
  • Describe any material noncompliance issues identified and the corresponding action taken.
According to the advisory, review of the first set of CCO annual reports provided to the CFTC last year under the newly effective rules showed significant weaknesses. The advisory states that these weaknesses can be addressed, in large part, by tailoring the compliance program to the firm's size, business model and potential conflicts of interest (see Legal Update, Study: Clarification Needed on Swap Dealer CCO Annual Reports). The annual report should be more transparent and granular and should precisely describe the firm's staffing and other resources, whether these resources and the program overall are sufficient and what steps the firm will take to better ensure compliance.
This Update is based on material provided by the Accelus service Compliance Complete (http://accelus.thomsonreuters.com/products/accelus-compliance-complete), which provides regulatory news, analysis, rules and developments, with global coverage of more than 400 regulators and exchanges.