December 21, 2014

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December 19, 2014

Futures Commission Merchants "FCMs" Required to Have Chief Compliance Officer by March 29

Commodity Futures Trading Commission Regulation 3.3, which requires each futures commission merchant (FCM) to designate a chief compliance officer (CCO), will become effective on March 29, 2013 in respect of FCMs that are not regulated by a prudential regulator or registered with the Securities and Exchange Commission as a broker-dealer (FCMs that fall into either of those categories have been required to have CCOs since October 1, 2012).

National Futures Association (NFA) Notice to Members I-13-07 sets forth information for FCMs to consider as they designate CCOs. First, if an FCM designates a CCO that is not already registered with the NFA as a principal of the FCM, the FCM must file CFTC Form 8-R for the CCO (which must be reviewed and verified by the CCO) and a set of fingerprint cards for the CCO. Second, each FCM must also update its Form 7-R to ensure the CCO Contact Information section is complete. These forms must be completed prior to the March 29 deadline and must be completed using the NFA’s Online Registration System.
Finally, all FCMs must file annual reports produced by each respective FCM’s CCO with the CFTC (Annual Report), as required by CFTC Regulation 3.3(e). The CCO’s Annual Report must cover the entire fiscal year and must be filed through the WinjammerTM system. FCMs that were (i) registered with the CFTC as of June 4, 2012 and (ii) regulated by a prudential regulator or registered with the SEC were required to have CCOs by October 1, 2012, and to file such Annual Reports within 90 days after their fiscal year ends.However, the CFTC granted time-limited no-action relief to such FCMs that submit Annual Reports for the fiscal year that ends on or before March 31, 2013 and that fails to satisfy the requirements of CFTC Regulation 3.3(e) and (f).This no-action relief limits the substantive scope of the Annual Report. To qualify for such no-action relief, the Annual Report must, among other things, still cover the entire fiscal year of its FCM, but may limit the CEO and/or CCO certification to the period from October 1, 2012 through the FCMs fiscal year end. The Annual Report must also include a review of policies and procedures reasonably designed to ensure compliance with certain customer protection rules set forth in the no-action letter.
All other FCMs registered with the CFTC, but not regulated by a prudential regulator or registered with the SEC (i.e., FCMs subject to the March 29, 2013 deadline), must file their respective Annual Reports within 90 days after such FCMs fiscal year end. Such FCMs are not required to submit Annual Reports for any fiscal year ending on or before March 29, 2013. The CFTC has not granted no-action relief to such FCMs.   
For more information, click here. The CFTC’s no-action letter can be found here.
©2014 Katten Muchin Rosenman LLP

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About this Author

Kenneth M. Rosenzweig, Katten Muchin Law Firm, Financial Institutions
Partner

Kenneth M. Rosenzweig focuses his practice on financial services matters, with an emphasis on the trading and clearing of financial instruments. Ken represents derivatives clearing organizations, designated contract markets and swap execution facilities, in addition to futures commission merchants, banks and other commercial participants in the exchange-traded and over-the-counter derivatives markets.

312-902-5381
Blake J. Brockway, Finance Attorney, Katten Muchin Law Firm
Associate

Blake J. Brockway concentrates his practice in financial service matters.

Mr. Brockway received his Bachelor of Science, with distinction, from Iowa State University in 2005. He received his Juris Doctor, magna cum laude, from DePaul University College of Law in 2009, where he was selected to the Order of the Coif. During law school, Mr. Brockway served a research staff member of the DePaul Business and Commercial Law Journal and his comment, "Applying Federal Securities Laws to Chapter 11 Claim Conversions," was published in Volume 7, Issue 4...

312.902.5438
Adam J. Spector, Katten Muchin Law firm, Financial Institutions Attorney
Associate

Adam J. Spector concentrates his practice in the financial services sector, representing hedge funds, commodity pools, proprietary trading firms, private equity funds and investment advisers with respect to their corporate, transactional and regulatory matters.

312-902-5275