enforcement

CFTC Issues No-Action Letter to Swap Dealers to Extend Collateral Rule Deadline due to Limitations with Custodial Accounts

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On September 1, 2016, the U.S. Commodity Futures Trading Commission’s (“CFTC”) Division of Swap Dealer and Intermediary Oversight announced that it “issued a time-limited, no-action letter stating that it will not recommend an enforcement action against a swap dealer subject to the September 1, 2016 compliance date for the CFTC’s uncleared swap margin rules, subject to certain conditions, for failing to fully comply with the custodial arrangement requirements of CFTC regulation 23.157 prior to October 3, 2016.” Press release.

FinCEN Issues Customer Due Diligence Rule (CDD) FAQs

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On July 19, 2016, the Financial Crimes Enforcement Network (“FinCEN”) issued FAQs regarding the customer due diligence requirements (“CDD”) that it published on May 11, 2016, for certain financial institutions, including brokers, dealers, future commission merchants and introducing brokers in commodities.  The FAQs provide interpretive guidance with respect to these requirements, including, in particular, the new regulatory requirement to identify and verify the identity of the “beneficial owners” of virtually all legal entity customers, other than a sole proprietorship and an unincorporated association.  The CDD defines “beneficial owner” as:

  • “each individual, if any, who, directly or indirectly, owns 25% or more of the equity interests of a legal entity customer; and
  • a single individual with significant responsibility to control, manage, or direct a legal entity customer, including an executive officer or senior manager. . .
  • or any other individual who regularly performs similar functions.”

The FAQs states:  “In short, covered financial institutions are now required to obtain, verify, and record the identities of the beneficial owners of legal entity customers.”

Speech by Tracey McDermott on FCA’s Approach to Enforcement

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On July 2, the FSA published a speech by Tracey McDermott, acting director of the FSA’s Enforcement and Financial Crime Division. The speech focused on credible deterrence and the approach that the Financial Conduct Authority (FCA) will take to enforcement. Speech.

Ms. McDermott commented on the FCA that:

  • thematic and firm-specific supervisors will work in a more integrated way;
  • the focus will increasingly be on senior management who fail to recognise and manage risks and fail to control the way products are sold; and
  • it will have a low tolerance for repeat offenders.

The FSA also published a speech by Martin Wheatley, chief executive designate of the FCA. His speech emphasised that the FCA will continue the FSA’s policy of credible deterrence. Speech.