In a speech last week before The Institute of International Bankers Risk Management and Compliance Seminar, Joshua Sterling, the new Director of the Commodity Futures Trading Commission’s Division of Swap Dealers and Intermediary Oversight, reiterated his plan to strengthen his division’s relationship with the CFTC’s enforcement division, and said he expected registrants to follow all rules – even those where there may be a consensus that they should be revised. According to Mr. Sterling, “[r]ules are written to be followed, and the associated costs are the price one pays to conduct business as a CFTC registrant.” Mr. Sterling indicated that he will “be working hard with CFTC colleagues to make sure that the calculus around compliance decisions [is] focused on following through, every day, on what our rules require.” Mr. Sterling foreshadowed that DSIO will soon begin preparing a formal examinations guidebook and expects to begin thematic reviews of select large swap dealers and commodity pool operators beginning in the first quarter of 2020 to determine how they “approach” important compliance and operational issues. Mr. Sterling has discussed his intent to strengthen his relationship with the CFTC’s enforcement division in prior speeches. (Click here for background in the article “New CFTC DSIO Head Promises Stronger Relationship With Enforcement While DOE Chief Lauds Efficacy of Parallel Actions With Other Enforcement Authorities, in the September 29, 2019 edition of Bridging the Week.)
Unrelatedly, in a presentation before the Association for Financial Markets in Europe’s Annual Compliance and Legal Conference, Tom Sexton, President of the National Futures Association, praised the benefits of self-regulation. He indicated that self-regulation has a “long history of working effectively,” and, in the United States, has succeeded because of the SROs’ ability to expend significant resources; gain industry insight by involving market professionals; respond quicker than government agencies in rule-making or rule enforcement in response to developments in the market; and dealing with global issues more effectively because of their authority to establish relationships with other SROs through contract, and not by national legislative acts. For SROs to be effective, posited Mr. Sexton, they require mandatory membership, industry leadership, a board and committee structure that ensures that no one industry sector dominates, the commitment of management to self-regulation, rulemaking and enforcement authority and government oversight.