Alert June 26, 2012

CFTC Proposes Rule Regarding Associated Persons of Swap Dealers and Major Swap Participants

The CFTC proposed a new rule that would “make clear” that swap dealers, major swap participants and other entities registered with the CFTC are required to supervise such entity’s associated persons and are jointly and severally responsible for the activities of the associated person with respect to customers common to it and any other swap dealer, major swap participant or other CFTC registrant. 

The release acknowledges that, unlike associated persons of other CFTC registrants, associated persons of swap dealers and major swap participants are not required to register as such.  As a result, swap dealers and major swap participants are not covered by existing CFTC regulations that allow a registered associated person to be associated with two or more sponsors (essentially, CFTC registrants) and that require such sponsors to supervise their associated persons and to be jointly and severally responsible for the associated person’s activities with respect to any customers common to such multiple sponsors.  The release explains that the existing CFTC rule is intended to prevent sponsors from attempting to assign liability for the actions or omissions of an associated person to a different sponsor with which the associated person is associated.  The proposed rule essentially extends the pre-existing regulation to include swap dealers and major swap participants.

Comments must be received by August 14, 2012.