The Compliance and Regulatory Consulting practice highlights regulatory information relating to the NFA from the fourth quarter of 2020.
CFTC Unanimously Approves a Final Rule Amending Form CPO-PQR
On October 6, 2020 the CFTC unanimously voted to adopt amendments to Form CPO-PQR for commodity pool operators (CPOs).
The amendments to Form CPO-PQR (1) eliminate existing Schedules B and C of the form, except for the Pool Schedule of Investments; (2) update the information requirements and instructions to request legal entity identifiers for commodity pool operators and their operated pools that have them and to delete questions regarding pool auditors and marketers; and (3) make certain other changes due to the rescission of Schedules B and C, including the elimination of all existing reporting thresholds.
The final rule also amends CFTC Regulation 4.27 to permit reporting CPOs to file NFA Form PQR, a comparable form required by the National Futures Association, in lieu of filing the CFTC’s revised form.
Read more here.
CFTC Staff Issues Advisory on Virtual Currency for Futures Commission Merchants
The Division of Swap Dealer and Intermediary Oversight (DSIO) of the CFTC issued an advisory on October 21, 2020 to futures commission merchants (FCMs) to explain how to hold and report certain deposited virtual currency from customers in connection with physically delivered futures contracts or swaps. The advisory also provides guidance that FCMs should follow when designing and maintaining risk management programs concerning the acceptance of virtual currencies as customer funds.
“At the CFTC, one of our core values is to provide clarity to market participants,” said DSIO Director Joshua B. Sterling. “As Chairman Tarbert has stated, the CFTC is committed to fostering responsible fintech innovation and improving the regulatory experience of registered firms where doing so is consistent with our rules. This advisory furthers these critical goals and will provide additional certainty on these issues as the Commission works to establish a holistic framework for digital asset derivatives.”
Coronavirus Update—Relief from the Onsite Annual Inspection of Branch Offices and Guaranteed IBs
Forex transactions require members with branch offices and/or guaranteed introducing brokers (IB) to conduct an annual on-site inspection of each branch office and guaranteed IB.
Due to COVID-19, it may be difficult for members to conduct onsite inspections at branch offices and guaranteed IBs this year. Therefore, although members must conduct the required annual inspection of each branch office and guaranteed IB by December 31, 2020, firms may conduct these inspections remotely. For the next calendar year, members that conduct a remote inspection this calendar year based on this relief will not be required to conduct an onsite inspection to comply with the Interpretive Notices' every-other-year restriction on remote inspections. Specifically, a member will be permitted to conduct a remote inspection again next year if its risk assessment (which factors in that the member did not conduct an on-site inspection this year) indicates that it is appropriate to do so.
CFTC Approves Amendments to Swap Clearing Requirement Exemptions
The CFTC approved final rules exempting swaps entered by certain financial institutions from the CFTC’s swap clearing requirement under the Commodity Exchange Act. The final rules govern which swaps are exempt from the clearing requirement under section 2(h)(1) of the CEA and Commission regulations. The CFTC announced this rule on November 2, 2020.
The amendments exempt swaps entered into by central banks, sovereign entities, international financial institutions, certain bank holding companies, savings and loan holding companies and community development financial institutions.
Read more here.
CFTC Unanimously Approves Final Rule for Granting Exemptions from Derivatives Clearing Organization Registration
On November 18, 2020, the CFTC approved a final rule establishing a framework to grant an exemption from registration as a derivative clearing organization to a clearing organization organized outside of the U.S. for the purpose of clearing proprietary swap transactions for U.S. persons.
Section 5b(h) of the Commodity Exchange Act permits the CFTC to exempt a non-U.S. clearing organization from registration for clearing swaps if the CFTC determines that the clearing organization is subject to comparable, comprehensive supervision and regulation by its home country authorities. The rule codifies the CFTC’s existing policies and procedures for granting such exemptions and establishes procedures it can use to modify or terminate an exemption.
Read more here.
CFTC Staff Extends Existing Brexit-Related Relief to Provide Market Certainty
On November 24, 2020, the CFTC extended previously granted temporary no-action relief to provide greater market certainty in connection with Brexit. In anticipation of the expiration of the Brexit transition period on December 31, 2020, the Market Participants Division (MPD) and Division of Market Oversight (DMO) issued two no-action letters to extend regulatory relief provided in April 2019.
One letter ensures the relief provided by the Division of Swap Dealer and Intermediary Oversight continues to be available for UK entities following the end of the transition period. The other letter stipulates that MPD and DMO will provide temporary relief to ensure the continued availability of substituted compliance and regulatory relief under CFTC comparability determinations and exemptive orders the CFTC originally issued for EU entities.
Read more here.
Compliance and Regulatory Consulting
Local and global compliance expertise for the financial services industry.
Comprehensive support for asset managers registering in the U.S.
Investment Adviser Services
SEC and CFTC registration and ongoing compliance support.
SEC Mock Examination Services
Comprehensive assistance in preparing for and managing an SEC exam
Broker-dealer registration, ongoing support services, and mock exams.
Comprehensive CFTC registration and ongoing support.
Comprehensive SEC registration support.