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Legal Opinion Language Issued by CFTC in Connection with LEI No-action Compliance
Practical Law Legal Update 3-523-4064 (Approx. 3 pages)
Legal Opinion Language Issued by CFTC in Connection with LEI No-action Compliance
by Practical Law Finance
| Published on 04 Jan 2013 • USA (National/Federal) |
On December 21, 2012, the CFTC released language to be used in legal opinions issued by counsel in compliance with the no-action relief issued by the CFTC from the obligation to report legal entity identifiers (LEIs) and certain other counterparty identifying information, which may be in contravention of non-US privacy laws.
On December 21, 2012, the CFTC's Division of Market Oversight (DMO) issued a press release recommending language to be used in legal opinions issued by counsel in compliance with the no-action relief issued by the CFTC from the obligation to report legal entity identifiers (LEIs) and certain other counterparty identifying information, which may be in contravention of non-US privacy laws. The relief extends to reporting parties under Dodd-Frank swap data reporting rules codified in Part 20 (large-trader reporting for physical commodity swaps), Part 45 ("SDR" swap data reporting) and Part 46 (historical swap data reporting) of the CFTC's Regulations. For detailed information on these rules, see Practice Notes, US Derivatives Regulation: CFTC Swap Data Reporting and Recordkeeping Rules and US Derivatives Regulation: Practical Guide to Over-the-Counter (OTC) Swap Data Reporting.
The release clarifies that the "written opinion of outside legal counsel" requirement specified in No-action Letter 12-46, issued December 7, 2012, for exemption from reporting certain identifying information including legal identity identifiers (LEIs) may be met if a legal memorandum from outside counsel includes the following attestation:
"We confirm that the rigor of the analysis we provided in our memorandum was no less extensive or involved than if we were to provide the same analysis in the form of a written, legal opinion. We confirm that we consider our memorandum to represent advice for which our firm takes full responsibility. We would, therefore, be obliged to stand behind such advice equally as we would for advice delivered in the form of a legal opinion."
The release also states that reporting parties may continue to provide a written opinion of outside legal counsel as a means of satisfying the relevant conditions for no-action relief in Letter 12-46.
The DMO issued Letter 12-46 granting temporary no-action relief on December 7, 2012 in response to concerns that:
- Potential conflicts may exist between the CFTC's swap data reporting rules requiring the reporting of swap counterparty LEIs and other information (see The Dodd-Frank Act: CFTC Swap Data Reporting Required Data Fields Checklist) and the privacy laws of certain non-US jurisdictions, which may restrict or prohibit the disclosure of a non-reporting party's identity information by a reporting party.
- Depending on the non-US jurisdiction, a reporting party may have to obtain a non-reporting party's consent, regulatory authorization or both before it can disclose identity information.
Subject to certain conditions, the DMO would not recommend an enforcement action against a reporting party for failure to report identity information until the earlier of:
- The time the reporting party obtains the non-reporting party's consent or regulatory authorization to disclose identity information.
- The time the reporting party no longer reasonably believes that non-US privacy laws preclude it from reporting identity information.
- 12:01 a.m. EDT June 30, 2013.
Identifying information other than LEIs covered by this relief include:
- The identity of the counterparty electing the exception to the mandatory swap clearing requirement of Title VII of the Dodd-Frank Act, now part of the CFTC's Regulations.
- The buyer and seller (but not both) in the commodity asset class.
- The internal identifier used by an SDR for a non-reporting counterparty.
For information on other recent swap data reporting no-action relief from the CFTC, see Legal Updates, Swap Data Reporting Relief for Prime Brokers Issued by CFTC, Limited No-action Relief from Swap Data Reporting Rules Issued by CFTC, Further Limited Swap Data Reporting Relief for Swap Dealers Issued by CFTC, and Final Dodd-Frank Cross-border Swap Exemptive Order Issued by CFTC.