Corporate & Financial Weekly Digest

Corporate & Financial Weekly Digest

FINRA Issues Report on Implications of Blockchain

Posted in Broker-Dealer

On January 18, the Financial Industry Regulatory Authority, responding to increased industry interest in distributed ledger technology (DLT) known as “Blockchain,” issued a report on the uses and potential implications of this technology in the securities industry.

The report provides an overview of DLT and its applications in various markets as well as discussing governance, operational structure and security concerns. The report also discusses regulatory challenges for broker-dealers, noting that a DLT network may create new ways to hold customer funds, impact a member firm’s net capital requirements, afford market participants the ability to develop and maintain certain records on the network itself, and alter clearance and settlement processes. Continue Reading

40 Days Left Until Compliance Date for Variation Margin Rules for Uncleared Swaps

Posted in Derivatives

As part of a global regulatory initiative, the United States, European Union, Canada, Switzerland, Japan, Hong Kong, Singapore and Australia have all adopted, or are in the process of adopting, rules (Margin Rules) that impose mandatory variation margin requirements on non-cleared swaps and, in some cases, non-cleared security-based swaps and FX derivatives (collectively, “Covered Trades”). Starting March 1, any entity that is a financial end user (FEU) will only be able to execute a Covered Trade with a US swap dealer if it has amended its swap documentation to comply with the requirements applicable to the dealer under the Margin Rules. Continue Reading

CFTC Grants Order to LCH

Posted in CFTC, Derivatives

On January 13, the Commodity Futures Trading Commission issued an order authorizing LCH.Clearnet Limited (LCH), a CFTC-registered derivatives clearing organization (DCO), and its clearing members that are registered futures commission merchants to: (1) commingle in a cleared swaps customer account customer money, securities and property used to margin, secure or guarantee both futures and foreign futures (“futures”) and cleared swaps; and (2) portfolio margin such futures and cleared swaps, subject to the requirements of CFTC Regulation 39.13(g)(4). Regulation 39.13(b)(4) provides that a DCO may allow reductions in initial margin requirements provided the price risks with respect to such positons are significantly and reliably correlated.

For more information on the order, click here.

CFTC Proposes to Amend Access to Swap Data Requirements

Posted in CFTC, Derivatives

On January 13, the Commodity Futures Trading Commission approved for publication in the Federal Register proposed amendments to Part 49 of the CFTC’s regulations relating to access to swap data held by Swap Data Repositories (SDR). Among other revisions, the proposal: (1) eliminates the requirement that foreign and domestic authorities seeking access to SDR swap data first indemnify the CFTC and each SDR from which such authorities access swap data; (2) permits, subject to satisfying certain conditions, domestic regulators to access SDR swap data by entering into confidentiality arrangements with the CFTC, and other domestic authorities, and all foreign authorities to receive such swap data after being deemed “appropriate” by the CFTC. Continue Reading

CFTC’s Enforcement Division Issues New Advisories on Cooperation

Posted in CFTC

On January 19, the Commodity Futures Trading Commission Division of Enforcement (“Division”) issued two new Enforcement Advisories outlining the factors the Division will consider in evaluating cooperation by individuals and companies in the Division’s investigations and enforcement actions. The advisory regarding companies updates an advisory last issued in 2007; the advisory regarding individuals is new. The advisories describe the factors that the Division may consider, on a discretionary basis, when determining whether a company has cooperated, the quality of that cooperation and what credit, if any, should be awarded for such cooperation. Among other factors, the Division considers whether individuals and companies are truthful and fully cooperate in Division investigations and enforcement actions, including by self-reporting and providing early and material assistance to the Division.

For more information on the advisories, click here.

ESMA Publishes Briefing on MiFID II Technical Data Reporting Requirements

Posted in EU Developments, Financial Markets

On January 13, the European Securities and Markets Authority (ESMA) published a briefing paper (Briefing Paper) summarizing technical data reporting requirements under the revised Markets in Financial Instruments Directive (MiFID II) and the associated Markets in Financial Instruments Regulation (MiFIR). Continue Reading

UK Announces Brexit Negotiating Principles

Posted in Brexit, Brexit/UK Developments, UK Developments

On January 17, UK Prime Minister Theresa May laid out the UK government’s negotiating principles for the United Kingdom’s departure from the European Union, which heralds a new, more substantive phase of the Brexit process.

The Prime Minister’s theme for the speech was the creation of a “stronger, fairer and global Britain” alongside a “new partnership” with the UK’s EU allies. The balance of the speech was devoted to describing May’s 12 key priorities in the upcoming negotiations, several of which are directly relevant for the financial markets. May also announced that both the House of Commons and the House of Lords will be given the opportunity to vote on the final deal with the European Union. Continue Reading

2017 Examination Priorities Announced by the SEC

Posted in Broker-Dealer

On January 12, the Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (OCIE) released its 2017 examination priorities, which seek to address: (1) the protection of retail investors; (2) risks related to elderly and retiring investors; and (3) market-wide risks. Continue Reading

CFTC Proposes To Amend Recordkeeping Requirements

Posted in CFTC

On January 12, the Commodity Futures Trading Commission approved for publication in the Federal Register proposed amendments to Regulation 1.31, which contains the recordkeeping requirements under the Commodity Exchange Act and CFTC regulations. The CFTC proposes to eliminate certain outdated terms and provisions, add new definitions, and update language to reflect advances in information technology. The CFTC intends the proposed rule to be technology-neutral so that the regulation may withstand technological advancements in the future.

Comments on the proposed rules must be received within 60 days following publication of the proposed amendments in the Federal Register.

The CFTC proposed rule is available here.

NFA Issues Notice to Members Regarding CPO/CTA Exemption Affirmations

Posted in CFTC

On January 11, National Futures Association (NFA) issued Notice I-17-02, which reminds NFA members of their obligations with respect to commodity pool operators (CPOs) and commodity trading advisors (CTAs) exempt from registration. The Commodity Futures Trading Commission requires any person claiming an exemption from CPO registration under CFTC Regulation 4.13(a)(1), 4.13(a)(2), 4.13(a)(3), 4.13(a)(5), an exclusion from CPO registration under Regulation 4.5, or an exemption from CTA registration under Regulation 4.14(a)(8) to affirm the applicable notice of exemption annually within 60 days of the calendar year end. Failure to complete the affirmation process is considered a request to withdraw from the exemption and, therefore, entities that do not affirm may be required to be registered with the CFTC and become NFA Members. Continue Reading