CFTC Extends Relief from Dodd-Frank Oral Recording Requirement to Certain Advisors | Practical Law

CFTC Extends Relief from Dodd-Frank Oral Recording Requirement to Certain Advisors | Practical Law

The CFTC issued a no-action letter providing temporary relief until December 31, 2014 to certain commodity trading advisors from oral recording requirements under CFTC Regulation 1.35(a). These requirements were scheduled to take effect on May 1, 2014.

CFTC Extends Relief from Dodd-Frank Oral Recording Requirement to Certain Advisors

Practical Law Legal Update 5-566-2558 (Approx. 4 pages)

CFTC Extends Relief from Dodd-Frank Oral Recording Requirement to Certain Advisors

by Practical Law Finance
Published on 28 Apr 2014 • USA (National/Federal)
The CFTC issued a no-action letter providing temporary relief until December 31, 2014 to certain commodity trading advisors from oral recording requirements under CFTC Regulation 1.35(a). These requirements were scheduled to take effect on May 1, 2014.
On April 25, 2014, the CFTC issued No-action Letter 14-60 (No-action 14-60), which extends temporary relief to members of designated contract markets (DCMs) or swap execution facilities (SEFs) that are commodity trading advisers (CTAs) until December 31, 2014 from the requirement under CFTC Regulation 1.35(a) to record all oral communications made in connection with the execution of a swap.
Amended Regulation 1.35(a) requires DCM and SEF "members" to keep "full, complete, and systematic records, which include all pertinent data and memoranda, of all transactions relating to its business of dealing in commodity interests and related cash or forward transactions." The systematic records required include "all oral and written communications provided or received concerning quotes, solicitations, bids, offers, instructions, trading and prices that lead to the execution of a transaction in a commodity interest and related cash or forward transaction, whether communicated by telephone, voicemail, facsimile, instant messaging, chat rooms, electronic mail, mobile device, or other digital or electronic media."
Pointing out that the costs associated with requiring asset managers that are members of a DCM or SEF to comply with written and oral recordkeeping requirements significantly outweigh the benefits, SIFMA requested a postponement of the compliance date. The CFTC granted this request, and CTAs that are members of a SEF or DCM therefore do not have to comply with the requirement to record oral communications in connection with the execution of swap transactions under CFTC Regulation 1.35(a) until December 31, 2014.
SIFMA originally requested relief from this recordkeeping requirement for "asset managers," as defined to include:
  • CTAs.
  • Commodity pool operators (CPOs).
  • Certain persons who are not required to register with the CFTC.
However, Regulation 1.35(a) further states that the requirement to record oral communications does not apply to certain enumerated persons, including CPOs and members of a DCM or SEF that are not registered or required to be registered with the CFTC in any capacity. However, CTAs are not among the exempted entities, so as a practical matter the relief is directed only to CTAs.
Relief from the Regulation 1.35(a) requirement to record oral communications originally granted under the following no-action letters was set to expire on May 1, 2014: