CFTC Provides No-Action Relief on Regulatory Requirements

In light of the growing impact from the COVID-19 (coronavirus) pandemic, the Commodity Futures Trading Commission’s (CFTC) Divisions of Swap Dealer and Intermediary Oversight (DSIO) and Market Oversight (DMO) issued eight no-action letters on March 17, 2020 providing relief for market participants from a number of regulatory requirements. In a press release announcing the relief, the CFTC stated “The spread of coronavirus has caused compliance with certain CFTC requirements to be particularly challenging or impossible because of displacement of registrant personnel from their normal business sites due to social distancing and other measures.”

Growing concern over the coronavirus has resulted in drastic changes to normal business operations as employees are required to work from home and employers implement “social distancing” measures. The relief is intended to provide flexibility to market participants, allowing them to focus on the current challenges posed by the coronavirus while maintaining orderly markets. Chairman Tarbet stated “These prudent, targeted, and temporary actions will help facilitate orderly trading and liquidity in our derivatives markets. The CFTC remains squarely focused on promoting their integrity, resilience, and vibrancy through sound regulation”.

This announcement followed similar action by the Securities and Exchange Commission (SEC), which, citing the impact of the coronavirus, issued orders on March 13, 2020 providing regulatory relief to registered funds and investment advisers. See here for additional detail regarding the SEC’s relief.

CFTC Staff urged registrants and other affected market participants that require additional relief to reach out to DSIO and DMO staff, who will address such requests on a case-by-case basis. Finally, staff retained the authority to modify, extend or terminate such relief at its discretion. A brief description of the no-action relief is below.

• The CFTC provided relief for members of Designated Contract Markets (DCM) and Swap Execution Facilities (SEF), futures commission merchants (FCM), introducing brokers (IB), floor brokers (FB), retail forex dealers (RFED), and swap dealers (SD) from time-stamping requirements when relevant personnel are located remotely. This relief is contingent upon a record of the date and time, to the nearest minute, being created and maintained. The relief will last until June 30, 2020.
• DSIO Staff provided relief to FCMs, IBs, FBs, RFEDs, and SDs from CFTC regulations requiring recording of oral communications related to voice trading and other telephonic communications when relevant personnel are located remotely. This relief is contingent upon registrants creating and maintaining a written record of the oral communication, including date, time, identifying information of the persons participating, and subject matter of the communication. Registrants must also take affirmative steps to collect and maintain any written materials pertaining to the content of the oral communication.
• DMO staff granted no-action relief to SEFs from regulations related to audit trail requirements, recordkeeping requirements related to maintaining a complete audit trail and monitoring requirements related to audit trail reconstruction, to the extent a SEF’s noncompliance was a result of voice trading personnel working remotely.
• The DMO granted no-action relief to DCMs from audit trail and related requirements, to the extent noncompliance was caused by the displacement of market participants from trading floors.
• The DSIO also granted 30 days of no-action relief to FCMs and SDs from the requirement to furnish the annual compliance report to the CFTC. Additionally, DMO staff granted SEFs an extension of time to submit their annual compliance reports and fourth quarter financial reports.
• Finally, DSIO staff granted FBs relief until June 30, 2020 from any requirement to be physically located at a DCM and any requirement to register as a IB which may have been triggered by a FB trading remotely.

As the number of cases around the world grows, Faegre Drinker’s Coronavirus Resource Center is available to help you understand and assess the legal, regulatory and commercial implications of COVID-19.