CFTC Approves Final Rule Requiring Recording of Oral Communications

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On December 17, 2012, the Commodity Futures Trading Commission (CFTC) adopted final rules amending CFTC Regulations 1.31 and 1.35. The final rules require certain market participants to record oral communications that lead to the execution of a commodity interest transaction. All such recordings must be kept for a period of one year in a form and manner that is identifiable and searchable by transaction. The final rules also expand upon the requirement that futures commission merchants (FCMs), introducing brokers (IBs), members of a designated contract market (DCM) and retail forex dealers (RFEDs) retain complete, full and systematic records including all data and memoranda related to their commodity interest business for a period of five years, and apply these requirements to members of a swap execution facility (SEF).

Records of Oral Communications -

Under the final rules, FCMs, IBs with aggregate revenues exceeding $5 million over the preceding three years, certain members of a DCM or SEF, and RFEDs must record all oral communications that lead to the execution of a commodity interest transaction, including oral communications conveying quotes, solicitations, bids, offers, instructions, trading and prices communicated by telephone, voicemail, mobile device or other digital or electronic media. Members of a DCM or SEF that are not registered or required to be registered with the CFTC in any capacity, floor traders, commodity pool operators, swap dealers and major swap participants are not subject to the recording requirements for oral communications set forth in CFTC Regulation 1.35. Oral communications that lead solely to the execution of a related cash or forward transaction and oral communications provided or received by a floor broker that do not lead to the purchase or sale of any commodity for future delivery, security futures product, swap or commodity option for any person other than the floor broker are also exempted from the recording requirements.

Please see full advisory below for more information.

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Topics:  CFTC, Commodities, Compliance, Oral Communications, Swaps

Published In: Administrative Agency Updates, General Business Updates, Finance & Banking Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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