Alert December 18, 2012

CFTC Provides No-Action Relief Regarding Requirements to Report Certain Identifying Information About Non-U.S. Counterparties

The CFTC’s Division of Market Oversight (the “Division”) provided no-action relief regarding compliance with certain CFTC reporting requirements as they pertain to counterparties located outside of the United States.  The requirements covered by the relief are included in the CFTC’s regulations on large trader reporting for physical commodity swaps (Part 20 of the CFTC’s regulations), swap data recordkeeping and swap data repository reporting requirements (Part 45), and swap data recordkeeping and swap data repository reporting requirements for historical swaps (Part 46).  Part 45 and Part 46 require that certain data fields must be included in swap data reporting, including the identification of each counterparty by a legal entity identifier (“LEI,” the current version of which is the CFTC Interim Compliant Identifier, or “CICI”), while Part 20 requires that the reporting entity disclose the identity of the counterparty in respect of which positional information is being reported in large swap trader reports and associated filings.

In response to a letter from the International Swaps and Derivatives Association stating that certain non-U.S. jurisdictions have privacy laws that may restrict or prohibit the disclosure of the required information about the non-reporting party or may require the consent of either the non-reporting party, its regulator, or both, the no-action relief states that the Division will not recommend that the CFTC commence an enforcement action against a reporting counterparty for failure to report the LEI and certain other identifying information of its counterparty if the reporting counterparty (i) has a reasonable belief, based in part on a written opinion of outside legal counsel, that the law or regulations of a non-US jurisdiction preclude the reporting of certain identifying information or could expose the reporting counterparty to criminal or civil liability for reporting such information (and, in the latter case, if it has determined that there is a material risk that such litigation may be initiated), (ii) has not yet obtained the necessary consent of the counterparty or authorization of a regulator for the disclosure of such information, and (iii) has made reasonable and demonstrable efforts to obtain such consent or authorization.  The relief expires upon the earliest of (1) the receipt of consent or authorization, (2) such time as the reporting counterparty no longer holds a reasonable belief that non-U.S. law precludes reporting the information, or (3) June 30, 2013.  The reporting party must follow certain requirements, such as retaining certain records, indicating in its reports that certain information has been withheld due to privacy laws, and, within 30 days of the expiration of the relief, updating its reports with the previously omitted information.  The letter specifies that the no-action relief “in no way” limits the CFTC’s authority to request and obtain the relevant information.