Alert December 18, 2012

CFTC Provides No-Action Relief to Certain Futures Commission Merchants Regarding Chief Compliance Officer Annual Reports

The CFTC’s Division of Swap Dealer and Intermediary Oversight (the “Division”) provided no-action relief from certain parts of Sections 3.3(e) and 3.3(f) of CFTC regulations requiring that the chief compliance officer (“CCO”) of a futures commission merchant (“FCM”) prepare and sign the FCM’s annual report, which must meet certain enumerated standards.  The relief comes in response to a request from the Futures Industry Association (the “FIA”), which argued, among other things, that many of the affected FCMs had not previously designated a CCO and that it would be difficult for a CCO to prepare a compliant annual report and make the required accompanying certifications prior to the compliance deadline.  The FIA also noted that FCMs would need to develop and test new controls and procedures to comply with new requirements and that operational concerns could complicate the preparation of the annual report.

The relief provides that the Division will not recommend that the CFTC take enforcement action against a “Covered Firm”—an FCM that was registered with the CFTC as of June 4, 2012, and is currently regulated by a U.S. prudential regulator or registered with the SEC—that fails to satisfy Sections 3.3(e) and 3.3(f) of the CFTC’s regulations if: (1) the Covered Firm’s annual report contains certain enumerated information; (2) the annual report covers the full fiscal year, although the CEO/CCO certification may be limited to the period from October 1, 2012 through fiscal year end; (3) the annual report is electronically furnished to the CFTC no later than 90 days after the Covered Firm’s fiscal year end; and (4) the Covered Firm satisfies the requirements of subparagraphs (f)(1) and (f)(4) of CFTC Regulation 3.3 (which require the CCO to provide the annual report to the Covered Firm’s board of directors or senior officer, and require the FCM to promptly furnish an amended annual report if material errors or omissions are identified).  The relief applies only to the first annual report required to be furnished by a Covered Firm to the CFTC for the fiscal year that ends on or before March 31, 2013.