In response to CFTC Letter No. 20-28, the Joint Audit Committee (JAC) has issued Regulatory Alert #20-02 and Regulatory Alert #20-03. As reported in the September 18 edition of Corporate & Financial Weekly Digest, CFTC Letter No. 20-28 provided supplemental guidance and no-action relief with respect to CFTC Regulation 1.56 (prohibition of guarantees against loss) compliance and further no-action relief with respect to the treatment of separate accounts by futures commission merchants (FCMs), initially set out in CFTC Letter No. 19-17. Specifically, with regard to compliance with the requirements of CFTC Regulation 1.56(b), Letter No. 20-28 gives FCMs until March 31, 2021 to remove or otherwise negate any limited recourse or similar provisions that may be contained in customer agreements. With regard to compliance with CFTC Rule 39.13(g)(8)(iii), the staff extended the time-limited no-action position from June 30, 2021 to December 31, 2021.
Continue Reading Joint Audit Committee Revises Earlier Regulatory Alerts to Conform to CFTC Letter No. 20-28

National Futures Association (NFA) recently redesigned its Annual Questionnaire, which applicants are required to submit with their NFA membership applications and current members are required to file annually. On September 29, at 9:30 a.m. CT/10:30 a.m. ET, NFA will host a webinar to address the transition to the new Annual Questionnaire.

Among other changes, the updated Annual Questionnaire:
Continue Reading NFA Announces Webinar to Debut Updated Annual Questionnaire

On August 26, the Securities and Exchange Commission adopted amendments to the definitions of “accredited investor” in Rule 501(a) and “qualified institutional buyer” in Rule 144A under the Securities Act of 1933 (Securities Act). The amendments expand the definition of accredited investor, a principal test to determine eligibility for participation in private capital markets, even if they do not meet specified income and net worth tests. Amendments to the qualified institutional buyer definition similarly expand the list of eligible entities under that definition. The amendments were adopted generally as proposed with no significant changes. The proposed amendments were previously covered in the December 20, 2019 edition of the Corporate & Financial Weekly Digest.
Continue Reading SEC Amends the Definitions of “Accredited Investor” and “Qualified Institutional Buyer”

On July 22, the Commodity Futures Trading Commission adopted rules (Final Rules) that set minimum financial capital requirements for swap dealers (SDs) and major swap participants (MSPs) that are not subject to prudential regulation (each, a “Covered Swap Entity” or CSE). The capital requirements were originally proposed in 2016, as explained in more detail here.

The core financial require
Continue Reading CFTC Adopts Final Capital Requirements for Swap Dealers

At an open meeting on July 22, the Commodity Futures Trading Commission heard presentations on three proposals for changes to the margin requirements for uncleared swaps. The proposed changes, which originate from recommendations made by the Margin Subcommittee of the CFTC Global Markets Advisory Committee (GMAC), are as follows:
Continue Reading CFTC Proposes Margin Requirements for Uncleared Swaps

On July 14, the Financial Industry Regulatory Authority (FINRA) filed a proposed rule change to amend Rule 2360 (Options) to increase position limits on options on certain exchange-traded funds. FINRA has indicated that increasing the position limits for conventional options subject to the proposed rule change could lead to a more liquid and competitive market for these options, which will benefit customers interested in these products.
Continue Reading FINRA Proposes to Increase Positions Limits on Certain Options

On June 10, the Financial Industry Regulatory Authority (FINRA) issued Regulatory Notice 20-17, which addresses changes to the Problem Codes that FINRA members are required to use for self-reporting customer complaints. These changes are designed in part to account for the new Regulation Best Interest and Form CRS requirements that take effect on June 30.
Continue Reading FINRA Revises Problem Codes for Reporting Customer Complaints and for Filing Documents Online

According to the Financial Industry Regulatory Authority (FINRA), financial institutions are allocating significant resources to developing applications that use artificial intelligence (AI) to offer innovative products, increase revenues, cut costs and improve customer service.
Continue Reading FINRA Releases White Paper on Artificial Intelligence

The Commodity Futures Trading Commission Divisions of Market Oversight (DMO), Swap Dealer and Intermediary Oversight (DSIO), and Clearing and Risk (DCR) (together, the Divisions) issued CFTC Letter 20-17 to remind Designated Contract Markets (DCMs), Futures Commission Merchants (FCMs) and Derivatives Clearing Organizations (DCOs) of their obligations to prepare for extreme market volatility, low liquidity and possibly negative pricing for certain contracts. The Divisions issued the advisory in light of unusually high volatility and negative pricing experienced in the May 2020 West Texas Intermediate (WTI), Light Sweet Crude Oil Futures contract on April 20 (the penultimate day of trading and expiration of the contract), although the guidance also applies to trading in other commodities.
Continue Reading CFTC Staff Issues Advisory Addressing Current Market Conditions