The Commodity Futures Trading Commission’s Division of Swap Dealer and Intermediary Oversight is giving compliance officers an additional 30 days to file the annual reports it requires from swap dealers and major swap participants.
As amended by the Dodd-Frank Act, the Commodity Exchange Act requires CCOs at those firms to prepare, sign, and furnish an annual report within 60 days of the end of their fiscal year, simultaneously with the submission of Form 1-FR-FCM or the Financial and Operational Combined Uniform Single Report (better known as a “FOCUS Report”). A no-action letter issued by the CFTC last week provides an additional 30 days for meeting this requirement.
At a minimum, the annual reports must: include a description of written policies and procedures, including the firm’s code of ethics and conflicts of interest policies; review applicable regulation and identify policies and procedures that are reasonably designed to ensure compliance; assess the effectiveness of those measures; and recommend potential or prospective changes or improvements to the compliance program and resources devoted to compliance.
The reports must also list any material changes to compliance policies and procedures during the coverage period for the report; describe the financial, managerial, operational, and staffing resources set aside for compliance; and describe any material non-compliance issue identified and the corresponding action taken.
The no-action relief was granted in response to a March 10 request by the Futures Industry Association and International Swaps and Derivatives Association. Among their concerns was that the gathering and analysis of all relevant policies and procedures, including the identification of non-compliance issues, was a time-consuming one. Also, FCMs and SDs that are dually registered as broker-dealers have an annual report requirement under FINRA’s broker-dealer rules that occurs on or near 90 days after their fiscal year-end. Being on the same timeline would be “efficient and beneficial,” the groups wrote.
“An additional 30 days will allow CCOs to devote sufficient time and resources to the creation of a report that facilitates an in-depth, substantial discussion on the state of the compliance program with the registrant’s senior management or board of directors,” the Division wrote in its concurring no-action letter. The relief will remain in effect until the adoption of a rule or rule amendment that modifies the timing requirements.