|May 6, 2014|
Previously published on April 25, 2014
On April 25, 2014, the Division of Swap Dealer and Intermediary Oversight and the Division of Market Oversight (collectively, the “Divisions”) of the U.S. Commodity Futures Trading Commission (“CFTC”) extended to December 31, 2014, the deadline by which Asset Managers1 and commodity trading advisors (“CTAs”) who are members of swap execution facilities (“SEFs”) or designated contract markets (“DCMs”) must comply with the oral recordkeeping requirements of CFTC Regulation 1.35(a).
CFTC Regulation 1.35(a), as amended in December 2012, requires that each member of a SEF or DCM “shall keep full, complete and systematic records, which include all pertinent data and memoranda, of all transactions relating to its business of dealing in commodity interest and related cash or forward transactions.” 17 CFR 1.35(a)(1). As part of the systematic recordkeeping system that is required under Regulation 1.35(a), the Regulation states that:
“included among the records required to be kept by this paragraph are all oral and written communications provided or received concerning quotes, solicitations, bids, offers, instructions, trading, and prices that lead to the execution of a transaction in a commodity interest and related cash or forward transactions, whether communicated by telephone, voicemail, facsimile, instant messaging, chat rooms, electronic mail, mobile device, or other digital or electronic media.” Id.
Initially, affected entities were required to be compliant with the requirement to maintain written records and to record oral communications by December 21, 2013, but the Divisions provided time-limited no-action relief from the portion of the rule relating to oral recordkeeping until May 1, 2014 to CTAs that are members of SEFs.2 As the December 21, 2013 no-action relief did not provide relief to CTAs that are members of DCMs, on March 21, 2014 the Divisions extended similar relief until May 1, 2014 to CTAs that are members of trueEX, a DCM and temporarily registered SEF, with respect to the execution of swaps on its DCM.3 The Divisions’ most recent time-limited no-action relief now extends the May 1, 2014 relief until December 31, 2014 and expands the relief to include CTAs that are members of both SEFs and DCMs.
Certain types of Asset Managers — including commodity pool operators (“CPO”) and members of a SEF or DCM that are not registered or required to be registered with the CFTC in any capacity — are already expressly excluded from the requirement under CFTC Regulation 1.35(a) to record oral communications, and therefore were not included in the relief.
The Divisions’ no-action relief is in response to a request by the Asset Management Group of the Securities Industry and Financial Markets Association (“SIFMA”) as well as comments from certain Asset Managers during a “Public Roundtable to Discuss Dodd-Frank End-User Issues” held by the CFTC staff on April 3, 2014.
1 While “asset manager” is not a registration category or defined term under the Commodity Exchange Act or the regulations promulgated pursuant thereto, the CFTC accepted this definition: “any person in the business of providing investment advice or advice regarding the value of securities or commodity interests for compensation and includes persons registered with the Securities and Exchange Commission or any U.S. state as an investment adviser under the Investment Advisers Act of 1940, any person registered with the Commission as a commodity trading advisor or commodity pool operator, any person regulated by a foreign regulatory authority as an investment adviser and any person operating pursuant to an exemption or exclusion from registration with or regulation by any such regulators.”
2 CFTC Letter 13-77.
3 CFTC Letter 14-33.