The Commodity Futures Trading Commission’s Division of Swap Dealer and Intermediary Oversight advised futures commission merchants and swap dealers that guidance it issued on December 4, 2019, regarding chief compliance officers’ annual reports was more aspirational than mandatory for such registrants’ 2019 reports to be filed this year. Acknowledging the late issue of its guidance, DSIO said that while it expected CCOs to “take reasonable measures” to institute the guidance’s recommendations this year, it expects CCOs “to consider those recommendations more completely when preparing their 2020 annual reports” to be filed in 2021.
In its December 4 Advisory, DSIO principally made recommendations regarding those portions of the CCO annual reports dealing with (1) areas for improvement; (2) prospective changes or improvements to compliance programs; (3) financial, managerial, operational and staffing resources; (4) material noncompliance issues; and (5) material changes to compliance policies and procedures. Staff also included recommendations regarding the CCO’s annual report’s certification requirement and other matters. (Click here for background on DSIO’s December 4 CCO annual report guidance in the article “Based on Experience, CFTC Staff Makes Recommendations of Better Practices for FCMs’ and Swap Dealers’ Chief Compliance Officer Annual Compliance Reports” in the December 8, 2019 edition of Bridging the Week.)
Compliance Weeds: Talk about being between a rock and a hard place. When a regulator issues guidance but later says, “This year, solely do the best you can to implement the guidance’s recommendations,” what do you do? Likely, follow that instruction literally – do the best you can and don’t worry if you can’t institute all of the regulator’s proposals. However, make sure you have considered each of them and to the extent one or more specific proposals are not feasible because of insufficient time, it’s not a bad idea to document your analysis and make sure you retain that documentation.