Corporate & Financial Weekly Digest

Latest from Corporate & Financial Weekly Digest

On August 4, the Commodity Futures Trading Commission’s Office of Customer Education and Outreach (the OCEO) issued a Customer Advisory regarding suspicious precious metal recommendations. Due to the relaxed rules under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), unregistered gold and silver dealers have increasingly been encouraging investors (1) to convert their retirement savings into investments of gold or silver coins or into self-directed gold individual retirement accounts, and (2) to make leveraged purchases of physical metals. These schemes often involve expensive premiums and hidden one-time or monthly fees. Further, physical metals such as collectible coins may…
On July 22, the Commodity Futures Trading Commission adopted rules (Final Rules) that set minimum financial capital requirements for swap dealers (SDs) and major swap participants (MSPs) that are not subject to prudential regulation (each, a “Covered Swap Entity” or CSE). The capital requirements were originally proposed in 2016, as explained in more detail here. The core financial requirement is capital equal to the greatest of $20 million or 8 percent (and in some cases, 2 percent) of the initial margin required on the CSE’s cleared and uncleared swaps, security-based swaps, futures and foreign futures, but the rules permit…
At an open meeting on July 22, the Commodity Futures Trading Commission heard presentations on three proposals for changes to the margin requirements for uncleared swaps. The proposed changes, which originate from recommendations made by the Margin Subcommittee of the CFTC Global Markets Advisory Committee (GMAC), are as follows: A proposal to amend the definition of Material Swaps Exposure (MSE) to change the calculation of MSE from June, July and August of the prior year to March, April and May of the then current year, with the initial margin start date in every year after 2022 being changed to September…
On July 17, the Commodity Futures Trading Commission’s Division of Swap Dealer and Intermediary Oversight (DSIO) announced that it has extended the time period for the no-action relief provided in CFTC Staff Letter No. 20-16 to registrants listing new principals and to applicants for registration as associated persons (APs) from the requirement to submit a fingerprint card. The relief extends until September 30 or any earlier date on which the National Futures Association (NFA) resumes the processing of fingerprints. Principals and APs relying upon the relief will still be required to submit their fingerprints to NFA within 30 days of…
In a release on July 16, the Commodity Futures Trading Commission (CFTC) encourages financial institutions to use a standardized approach to assess and improve their cybersecurity preparedness. Although the CFTC does not endorse any particular tool, the CFTC specifically identifies various organizations providing best practices to the industry, including the National Institute of Standards and Technology, the International Organization for Standardization, the Information Systems Audit and Control Association and the Information Technology Infrastructure Library. The CFTC also lists a number of standardized tools that support financial institutions in their self-assessment activities, including the Financial Services Sector Coordinating Council Cybersecurity Profile,…
On June 29, the Commodity Futures Trading Commission’s (CFTC) Technology Advisory Committee (TAC) announced that it will hold a public meeting on July 16. At this meeting, the TAC will hear presentations from the TAC subcommittees on Automated and Modern Trading Markets, Distributed Ledger Technology and Market Infrastructure, Virtual Currencies and Cybersecurity. The meeting will be held via conference call in accordance with CFTC’s implementation of social distancing due to COVID-19. More information is available here.…
On July 8, the Commodity Futures Trading Commission (CFTC) announced that its 2020-2024 Strategic Plan (Strategic Plan) is now final. The Strategic Plan was unanimously approved by the CFTC in May and was subject to a 30-day comment period that ended in June. The Strategic Plan focuses on the following five strategic goals, each with clearly defined objectives: Strengthening the resilience and integrity of the derivatives markets while fostering their vibrancy; Regulating the derivatives markets to promote the interests of all Americans; Encouraging innovation and enhancing the regulatory experience for market participants at home and abroad; Being tough on those…
On July 8, the National Futures Association (NFA) issued Notice I-20-27 to remind member firms that the compliance date for NFA’s Swaps Proficiency Requirements (Requirements) is January 31, 2021 (Compliance Date). NFA Members with associated persons (AP) required to satisfy the Requirements must ensure that covered individuals are in compliance by the Compliance Date. Individuals who do not satisfy the Requirements by the Compliance Date will be unable to engage in swaps activities until they have done so. NFA encourages individuals to complete the Requirements in advance of the Compliance Date to ensure that they (1) remain approved as a…
On June 30, the Alternate Reference Rate Committee (ARRC) that works under the auspices of the Federal Reserve Bank of New York published another document to assist capital markets participants in their transition away from use of LIBOR as a transactional interest rate. The document is entitled “AARC Recommendations Regarding More Robust Fallback Language for New Originations of LIBOR Syndicated Loans.” These recommendations update a set of ARRC–recommended rate fallbacks for syndicated loans that was published in 2019. One key change is that ARRC is now suggesting that all syndicated loans should use the so-called “hardwired” approach for fallbacks because…
On June 25, the five prudential regulators responsible for the margin rules for bank swap dealers (the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC), the Farm Credit Administration and the Federal Housing Finance Agency) adopted one final rule and one interim final rule that modify their original framework for margining uncleared swaps. The final rule amends the original swap margin rule in the following noteworthy ways: It permits swaps entered into prior to an applicable compliance date (legacy swaps) to retain their legacy status…
On June 25, the five regulators responsible for Section 13 of the Bank Holding Company Act of 1956 (Volcker Rule) approved a set of amendments that modify and clarify the covered fund provisions of the regulations implementing the Volcker Rule. (The five regulators are the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System, the Commodity Futures Trading Commission, and the Securities and Exchange Commission.) The final amendments are generally the same as those proposed in January of this year. Among other things, the final rule:…
On June 9, at the request of the Futures Industry Association, the International Swaps and Derivatives Association, and the Securities Industry and Financial Markets Association, the Commodity Futures Trading Commission’s (CFTC) Division of Swap Dealer and Intermediary Oversight (DSIO) and Division of Market Oversight (DMO) announced that they have extended no-action relief that was set to expire on June 30.  DSIO and DMO originally issued a series of CFTC Staff Letters on March 17 (Nos. 20-02, 20-03, 20-04, 20-05, 20-06, 20-07, and 20-09, collectively, COVID-19 Letters) in response to the COVID-19 pandemic, which provided no-action relief to market participants for…
On June 2, the National Futures Association (NFA) issued Notice I-20-23 to advise member futures commission merchants (FCMs), forex dealers members (FDMs) and introducing brokers (IBs) that the Joint Audit Committee had recently issued Regulatory Alert #20-01 to remind these registrants of the appropriate net capital treatment of guaranteed obligations and liabilities of subsidiaries or affiliates. Pursuant to CFTC Regulation 1.17(f)(4), the full amount of any guaranteed obligation or liability of a subsidiary or affiliate that is not reported through consolidation of the subsidiary or affiliate must be reflected in the computation of adjusted net capital. Notice I-20-23 is available…
On June 2, the National Futures Association (NFA) issued Notice I-20-22 identifying recent rule amendments that are now reflected in NFA’s Self-Examination Questionnaire. Among other minor changes, the questionnaire reflects recent amendments to the following: Interpretive Notice 9019 — Compliance Rule 2-9: Supervision of Branch Offices and Guaranteed introducing brokers (IBs) (effective January 1); Compliance Rules 2-29 and 2-36 and related Interpretive Notices regarding communications with the public and promotional material (effective January 1); and Compliance Rules 2-8 and 2-30 and Interpretive Notice 9029 — NFA Compliance Rule 2-10: The Allocation of Bunched Orders for Multiple Accounts (effective March 1).…
On May 28, the National Futures Association (NFA) submitted to the Commodity Futures Trading Commission (CFTC) proposed amendments to NFA Interpretive Notice 9045 (Interpretive Notice) regarding the anti-money laundering (AML) Programs that introducing brokers (IBs) (and futures commission merchants) are required to implement. The Interpretive Notice provides that the AML programs adopted by IBs must include, inter alia, written customer identification program (CIP) procedures designed to allow the IB to form a reasonable belief that it knows the true identity of each customer. The proposed amendment to the Interpretive Notice incorporates recent guidance from the CFTC, found in CFTC Letter…
On May 28, the National Futures Association (NFA) submitted to the Commodity Futures Trading Commission (CFTC) proposed amendments to NFA Interpretive Notice 9050 regarding risk disclosure statements for security futures contracts. NFA Compliance Rule 2-30(b) and Interpretive Notice 9050 require NFA Members and Associates, who are registered as brokers or dealers under Section 15(b)(11) of the Securities Exchange Act of 1934, to provide a uniform disclosure statement for security futures products (SFPs) to a customer at or before the time the Member approves the account to trade SFPs. The proposed amendments update the Risk Disclosure Statement section of the Interpretive…