Corporate & Financial Weekly Digest

Corporate & Financial Weekly Digest

CFTC Extends Previously Granted No-Action Relief for Swap Dealers Complying With EU Requirements

Posted in CFTC, Derivatives

On April 18, the Commodity Futures Trading Commission’s Division of Swap Dealer and Intermediary Oversight (DSIO) issued No-Action Letter 17-22, which extends relief previously granted under CFTC No-Action Letter 17-05. CFTC No-Action Letter 17-05 allowed certain swap dealers to substitute compliance with the non-centrally cleared OTC derivative margin requirements applicable in the European Union (the “EU Rules”) for compliance with certain of the CFTC’s uncleared swap margin requirements in cross-border transactions with counterparties subject to the EU Rules. The overall CFTC framework for substituted compliance is conditioned in the case of each other jurisdiction on a determination by the CFTC that the rules of the other jurisdiction are “comparable” to the relevant CFTC rules. The effect of the relief was to suspend that condition for the EU. The no-action relief only applied to swap dealers that do not have a prudential regulator (i.e., non-bank swap dealers).

The no-action relief provided pursuant to CFTC No-Action Letter 17-05 is effective until (and excluding) May 8. As the CFTC continues to analyze whether a comparability determination with respect to the EU Rules is appropriate, DSIO is extending the previously granted relief through (and excluding) November 7.

The CFTC’s No-Action letter is available here.


CFTC Seeks Comment on CME Petition for Order Permitting Commingling of Funds

Posted in CFTC

The Chicago Mercantile Exchange, Inc. (CME) has submitted to the Commodity Futures Trading Commission a petition for an order pursuant to Section 4d of the Commodity Exchange Act (CEA) whereby CME and its clearing members that are registered futures commission merchants would be permitted to hold, in accounts segregated in accordance with Section 4d of the CEA, Dubai Mercantile Exchange-listed positions and funds related to products in the energy sector. If granted, the order would expand a previous order pertaining to a more limited number of Dubai Mercantile Exchange energy products. Comments should be submitted electronically to the CFTC on or before April 28.

The CME’s petition is available here.

CFTC Grants Registration to NEX SEF Limited

Posted in CFTC, Derivatives

On April 20, the Commodity Futures Trading Commission announced that it had issued an Order of Registration to NEX SEF Limited (NEX) whereby NEX was granted registration status with the CFTC as a swap execution facility (SEF). In granting NEX’s application, the CFTC determined that NEX demonstrated compliance with the Commodity Exchange Act and CFTC regulations applicable to SEFs. NEX is incorporated in the United Kingdom. There are now 24 SEFs registered with the CFTC.

The CFTC’s registration order is available here.

UK Prime Minister Announces Snap General Election

Posted in Brexit, Brexit/UK Developments, UK Developments

On April 18, UK Prime Minister Theresa May announced her intention for a general election to be held on June 8. The announcement came three weeks after the March 29 submission by the United Kingdom of the “Article 50” notice to begin exit negotiations from the European Union (for further information see the Corporate & Financial Weekly Digest edition of March 31, 2017). Continue Reading

FCA Explores Meaning of “Durable Medium” on Website

Posted in Financial Markets, UK Developments

On April 7, the UK Financial Conduct Authority (FCA) updated part of its website on the meaning of “durable medium,” aiming to clarify the meaning and intention of the phrase as well as to explain its origin in EU law.

Various EU regulatory provisions require that a firm must provide certain information to a client in writing, either on paper or in another “durable medium.” Many recordkeeping requirements, including under the revised Markets in Financial Instruments Directive (MiFID II), also require firms to store information in a durable medium. Citing the lack of clarity on how innovative and new forms of media could meet the durable medium standard, the FCA states that it will update its handbook definition of the term. Continue Reading

SEC Division of Corporate Finance Issues New C&DIs on “Regulation A+” and Regulation Crowdfunding

Posted in SEC/Corporate

The Securities and Exchange Commission’s Division of Corporation Finance recently issued new compliance and disclosure interpretations (C&DIs) related to so-called “Regulation A+” and Regulation Crowdfunding promulgated under the Jumpstart Our Business Startups (JOBS) Act. The C&DIs pertaining to Regulation Crowdfunding were issued on the same day as the SEC’s announcement of the adoption of technical amendments to the JOBS Act Rules, including amendments to increase the amount of money companies can raise through crowdfunding (as discussed in the April 7 edition of Corporate & Financial Weekly Digest). Continue Reading

SEC Division of Corporation Finance Provides Update on Conflict Minerals Rule

Posted in SEC/Corporate

On April 7, the Securities and Exchange Commission Division of Corporation Finance (the Division) issued a statement regarding the effect of recent judicial action with respect to the SEC’s conflict minerals rule. In its statement, the Division clarified that, in light of the uncertainty regarding the rule, subject to further review, the Division will not pursue enforcement actions against companies that do not comply with the “source and chain of custody” due diligence requirements and related disclosure in Item 1.01(c) of Form SD. Continue Reading

National Adjudicatory Council Revises Sanction Guidelines

Posted in Broker-Dealer

The Financial Industry Regulatory Authority, through the National Adjudicatory Council (NAC), has revised the FINRA Sanction Guidelines that hearing panels and the NAC use in determining appropriate remedial sanctions for FINRA members in disciplinary proceedings. Among other changes, the revised Sanction Guidelines include the following additions:

  • three new guidelines: Supervision—Systemic Supervisory Failures, Borrowing From or Lending to Customers and Short Interest Reporting;
  • a new general principle examining the mitigating effects of regulatory or firm-imposed sanctions and corrective action;
  • a new factor considering whether a respondent has exercised undue influence over a customer;
  • revised sanctions for more serious FINRA rule violations; and
  • other conforming changes.

The new guidelines were effective immediately upon publication. More details are available in FINRA Regulatory Notice 17-13.

NFA Issues Notice Regarding Updated FinCEN AML/CFTC Guidance

Posted in CFTC

On April 10, the National Futures Association (NFA) published Notice I-17-09, which notified member futures commission merchants (FCMs) and introducing brokers (IBs) of an April 5 advisory published by the Financial Crimes Enforcement Network (FinCEN), regarding updates to the Financial Action Task Force’s list of jurisdictions with strategic anti-money laundering and combating the financing of terrorism (AML/CFT) deficiencies. The advisory includes specific updates regarding AML/CFT compliance issues related to the Democratic People’s Republic of Korea, Iran and Ethiopia. NFA reminded member FCMs and IBs to review the aforementioned advisory and revise, if necessary, their respective AML programs to comply with the new guidance.

Notice I-17-09 is available here.

The FinCEN advisory is available here.

CFTC Releases No-Action Letter Regarding the Transfer of Customer-Owned Securities by FCMs to Foreign Brokers

Posted in CFTC

On April 11, the Commodity Futures Trading Commission’s Division of Swap Dealer and Intermediate Oversight (DSIO) made publicly available No-Action Letter No. 16-88. This letter grants no-action relief to a futures commission merchant (FCM) intending to deposit customer-owned securities in an individual client account (ISA) with a United Kingdom affiliate (Affiliate) for purposes of margining such customers’ foreign futures or foreign options positions executed on a foreign board of trade located in the UK and cleared through a clearing organization that (1) is a central counterparty (CCP) that has received a recognition order as a recognized clearing house (RCH) and is subject to supervision by the Bank of England under Part 18 of the Financial Services and Markets Act 2000; and (2) has been authorized as a CCP pursuant to Article 17 of Regulation (EU) No 648/2012 of the European Parliament and the July 4, 2012 Council on OTC derivatives, central counterparties and trade repositories (an EU CCP). Continue Reading