FCMs Required to Have Chief Compliance Officer by March 29

Commodity Futures Trading Commission Regulation 3.3, which requires each futures commission merchant (FCM) to designate a chief compliance officer (CCO), will become effective on March 29, 2013 in respect of FCMs that are not regulated by a prudential regulator or registered with the Securities and Exchange Commission as a broker-dealer (FCMs that fall into either of those categories have been required to have CCOs since October 1, 2012).

National Futures Association (NFA) Notice to Members I-13-07 sets forth information for FCMs to consider as they designate CCOs. First, if an FCM designates a CCO that is not already registered with the NFA as a principal of the FCM, the FCM must file CFTC Form 8-R for the CCO (which must be reviewed and verified by the CCO) and a set of fingerprint cards for the CCO. Second, each FCM must also update its Form 7-R to ensure the CCO Contact Information section is complete. These forms must be completed prior to the March 29 deadline and must be completed using the NFA’s Online Registration System.

Finally, all FCMs must file annual reports produced by each respective FCM’s CCO with the CFTC (Annual Report), as required by CFTC Regulation 3.3(e). The CCO’s Annual Report must cover the entire fiscal year and must be filed through the Winjammer™ system. FCMs that were (i) registered with the CFTC as of June 4, 2012 and (ii) regulated by a prudential regulator or registered with the SEC were required to have CCOs by October 1, 2012, and to file such Annual Reports within 90 days after their fiscal year ends. However, the CFTC granted time-limited no-action relief to such FCMs that submit Annual Reports for the fiscal year that ends on or before March 31, 2013 and that fails to satisfy the requirements of CFTC Regulation 3.3(e) and (f). This no-action relief limits the substantive scope of the Annual Report. To qualify for such no-action relief, the Annual Report must, among other things, still cover the entire fiscal year of its FCM, but may limit the CEO and/or CCO certification to the period from October 1, 2012 through the FCM’s fiscal year end. The Annual Report must also include a review of policies and procedures reasonably designed to ensure compliance with certain customer protection rules set forth in the no-action letter.

All other FCMs registered with the CFTC, but not regulated by a prudential regulator or registered with the SEC (i.e., FCMs subject to the March 29, 2013 deadline), must file their respective Annual Reports within 90 days after such FCM’s fiscal year end. Such FCMs are not required to submit Annual Reports for any fiscal year ending on or before March 29, 2013. The CFTC has not granted no-action relief to such FCMs.

For more information, click here. The CFTC’s no-action letter can be found here.

Topics:  CFTC, Chief Compliance Officers, Compliance, FCMs, NFA, Reporting Requirements

Published In: 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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