CFTC Division of Swap Dealer and Intermediary Oversight ("DSIO") Director Joshua B. Sterling provided clarification on the CFTC's announcement that it would conduct "targeted thematic reviews" of CPOs and swap dealers.
In remarks before the Alternative Investment Management Association, Mr. Sterling stated that the thematic review program is part of the CFTC's recently announced "Five Building Blocks" Program, which is designed to make the CFTC the "global standard for sound derivatives regulation." The two principal goals of the thematic review program are, according to Mr. Sterling, to (i) improve the agency's understanding of market participants and activities so as to identify "blind spots" in its oversight and (ii) improve communications between the DSIO, on the one hand, and CPOs and swap dealers, on the other.
Mr. Sterling addressed questions and concerns about the thematic review program, reporting that it is designed to:
be targeted in scope and help educate the DSIO on registered firms;
help the DSIO evaluate potential rule amendments to CPO and swap dealer requirements;
be completed onsite and within five business days;
review a limited number of CPOs and swap dealers that have a significant impact on the derivatives market; and
not be duplicative of NFA examinations.
Mr. Sterling stated that the thematic reviews would "look at key issues across firms for the purpose of providing general guidance and informing potential future rulemakings . . . [and] are intended to enhance our oversight abilities." He said the results of the review would be kept confidential.
Mr. Sterling emphasized that the DSIO is conducting these reviews for education, not enforcement purposes. However, he said that the DSIO communicates with the Division of Enforcement regularly and reserves the right to change direction during the reviews.