On December 22, 2014, the Commodity Futures Trading Commission’s Division of Swap Dealer and Intermediary Oversight (DSIO) issued guidance regarding the annual reports that must be filed by the chief compliance officer (CCO) of a swap dealer, major swap participant or futures commission merchant pursuant to CFTC Regulation 3.3. Although compliance with the guidance is not mandatory, DSIO expects CCOs to make an effort to incorporate this guidance into their annual reports for 2014.
The guidance sets forth DSIO’s recommendations for complying with the provisions of CFTC Regulation 3.3(e), which require the CCO annual report to: (1) describe the firm’s written policies and procedures; (2) review the applicable requirements of the Commodity Exchange Act and CFTC Regulations and identify the written policies and procedures designed to ensure compliance with each; (3) assess the effectiveness of those policies and procedures, which assessment must be completed on a requirement by requirement basis and not as an overall or general indication of effectiveness; (4) discuss areas for improvement, which, the guidance clarified, should include a discussion of improvements suggested in a prior report; (5) list material changes to the compliance policies and procedures; (6) describe the compliance resources and deficiencies in those resources; and (7) identify material non-compliance issues. DSIO suggested that a CCO provide the definition of the term “material” that it applied when it determined whether there were any material changes to policies and procedures or material non-compliance issues. The guidance also acknowledged that a chart is an appropriate mechanism for conveying the large amount of information that is presented in the annual report and provided a sample chart.
The DSIO guidance is available here.