Compliance Avenue

The Commodities Futures Trading Commission (CFTC) is poised to obtain broad discretion to regulate the traditionally private over-the-counter (OTC) derivatives markets under the U.S. financial reform bill.  The notional amount of outstanding OTC derivatives has been estimated at $615 trillion as of December 2009.

While the Securities and Exchange Commission will regulate security-based derivatives, the CFTC will regulate swaps, which are a much larger component of the derivatives market.  Language currently in the bill would require large swap traders to register with the CFTC and disclose details of proposed swaps, as well as possibly establish position limits on trading.  The CFTC would also have discretion to regulate clearing houses that process derivatives.  CFTC Chairman Gary Gensler compared these regulations to “street lights” on “dark and dangerous highways.”

As reported by Reuters, Gensler is very interested in shaping the legislation and has been spending much of his time meeting with high-profile lawmakers, including Senate Banking Committee Chairman Christopher Dodd, the ranking Republican committee member Richard Shelby and Senate Agriculture Committee Chairman Blanche Lincoln.

The Securities and Exchange Commission and the Commodity Futures Trading Commission (CFTC) announced that the first meeting of the Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues will be held on Monday, May 24.

The Joint Committee will discuss the preliminary findings of the staffs of the CFTC and SEC related to the unusual market events of May 6.  Monday’s meeting will be webcast live on the Internet at www.sec.gov.

For a list of members of the Joint Committee please go to http://www.sec.gov/news/press/2010/2010-79.htm

Securities and Exchange Commission Chairman Mary Schapiro and Commodity Futures Trading Commission Chairman Gary Gensler recently announced the formation of a joint committee that will address emerging regulatory issues.  The establishment of this committee was one of many recommendations included in the agencies’ harmonization report issued last year.  The first item on the committee’s agenda will be to review last Thursday’s market events and to make recommendations related to market structure issues, disparate trading conventions and rules across various markets.

Read More: http://www.sec.gov/rules/other/2010/33-9123.pdf
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A few weeks ago, the Commodity Futures Trading Commission (”CFTC”) issued amendments to regulations covering periodic account statements and annual reports that Commodity Pool Operators (”CPOs”) need to prepare and distribute for the commodity pools the CPOs operate. Several of the amendments will impact the reporting that is presently prepared and distributed by CPOs that operate pools in accordance with CFTC Regulation 4.7 (”4.7 Pools”). Furthermore, one of the amendments impacts the annual reports prepared and distributed by those claiming exemptions from registration in accordance with CFTC Regulations 4.13(a)(3) or 4.13(a)(4). These amendments will become effective today and changes that affect annual financial reports will apply to annual reports distributed for fiscal years ending December 31, 2009 and later.

This post only summarizes the amendment provisions. You can view the final rule release here. Read the rest of this entry »

Eight federal regulators (including the SEC and CFTC) recently released a final version of a model privacy notice that will make it easier for consumers (i.e. investors/advisory clients) to understand how financial institutions collect and use personal information.

As way of background, the Gramm-Leach-Bliley Act contains a series of requirements governing the disclosure and use of non-public personal information by financial institutions.   The GLB Act requires the SEC (among others) to carry out the purposes of the provisions and establish standards for their application.  The SEC’s Reg S-P covers investment companies, broker/ dealers and registered investment advisers.  In 2006, the Financial Services Regulatory Relief Act of 2006 amended the GLB Act to require the applicable agencies to provide a succinct model form that allows consumers to easily compare the privacy practices of different financial institutions.

The initial proposed form was released in 2007 and after a comment and research period, a new model form has now been released. This new model form (there’s actually two versions–one with opt-out and one with no opt-out), which can be found here, provides a safe harbor for complying with the privacy rules.

Willkie Farr & Gallagher has a very nice summary of some of the other features and drawbacks of the new model privacy form.

We’ve previously highlighted the joint meetings that the SEC and CFTC held earlier this fall to discuss a coordinated approach between the two regulators.    It seems like these meetings have born some fruit, as last week the two agencies jointly issued their report identifying the areas where their respective regulatory regimes differ and outlining actions to harmonize those differences.   You can read the full report and bask in the harmony here.

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Earlier today, the SEC and CFTC announced the participants and published the agenda for the joint meetings on regulation harmonization that are being held tomorrow September 2 and Thursday, September 3.

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