Mr. Christopher Kirkpatrick
Secretary of the Commission
Commodity Futures Trading Commission
Three Lafayette Center
1155 21st Street NW.
Washington, DC 20581

Re: Chief Compliance Officer Duties and Annual Report Requirements for Futures Commission Merchants, Swap Dealers, and Major Swap Participants; Amendments (RIN 3038-AE56)

Dear Mr. Kirkpatrick:

The Futures Industry Association (“FIA”) and Securities Industry and Financial Markets Association (“SIFMA”) are pleased to submit this letter in response to the proposal (the “Proposal”)3 by the Commodity Futures Trading Commission (“Commission”) regarding chief compliance officer (“CCO”) duties and annual report requirements for futures commission merchants (“FCMs”), swap dealers (“SDs”), and major swap participants (“MSPs”) (collectively, “Registrants”) set forth in Commission Regulations § 3.3 (“Rule 3.3”). We support the efforts of the Commission and its staff to review and revise Rule 3.3 with a view to promoting consistency (where appropriate) with parallel requirements adopted by other regulators, reducing undue regulatory burdens, and improving regulatory oversight.

These objectives accord with the goal of the Commission’s Project KISS initiative to simplify rules in order to make them less costly and less burdensome. Adopting the Proposal with the modifications we set out below would help advance this goal.

As described in greater detail below, we have identified additional steps the Commission should take to align Rule 3.3 with parallel rules adopted by the Securities and Exchange Commission (“SEC”) for security-based swap (“SBS”) dealers and major SBS participants (the “SEC CCO Rule”)4 and Financial Industry Regulatory Authority (“FINRA”) for broker-dealers (the “FINRA Annual Compliance Report Rule”).5 By taking these steps, the Commission can clarify a CCO’s role within a Registrant’s overall organization, foster accountability for senior business management and supervisors, and reduce obstacles that Rule 3.3’s existing requirements have posed to attracting and retaining highly qualified professionals to serve as CCOs. These steps also would help free up CCOs’ compliance resources to do the important work of, among other things, monitoring, testing, and enhancing their compliance programs.

At the same time, the Commission should not harmonize Rule 3.3 with the SEC CCO Rule and FINRA Annual Compliance Report Rule in every respect. In particular, governance-related aspects of Rule 3.3 should take into account the broader range of business models, corporate forms and organizational structures represented among Registrants relative to SBS dealers and broker-dealers.

Also, both existing Rule 3.3 and the SEC CCO Rule present challenges and inconsistencies for Registrants subject to consolidated, group-wide prudential supervision and regulation (including the Volcker Rule). The Proposal provides an opportunity for the Commission instead to make Rule 3.3 consistent with the guidance and regulations applicable to those Registrants.

Further, in conjunction with revising Rule 3.3, the Commission or its staff should make appropriate updates to guidance regarding the rule. We have in particular suggested updates to staff guidance regarding the requirements for a CCO to prepare and sign an annual compliance report (“CCO Annual Report”), which are intended to foster consistency with the substance and policy supporting the Proposal’s changes to those requirements.

Our comments on these matters are organized as follows. First, we address the duties of CCOs under Rule 3.3(d). Second, we cover the CCO Annual Report requirements in Rule 3.3(e) and (f). Third, we comment on the defined terms used in Rule 3.3, including “senior officer.” Fourth, we address the application of Rule 3.3 to the Volcker Rule. Fifth, we address substituted compliance. Finally, we conclude by making suggestions relating to the compliance date for changes to Rule 3.3.

Continue Reading >

1 FIA is the leading global trade organization for the futures, options and centrally cleared derivatives markets, with offices in London, Singapore and Washington, D.C. FIA’s membership includes clearing firms, exchanges, clearinghouses, trading firms and commodities specialists from more than 48 countries as well as technology vendors, lawyers and other professionals serving the industry. FIA’s mission is to support open, transparent and competitive markets, protect and enhance the integrity of the financial system, and promote high standards of professional conduct. As the principal members of derivatives clearinghouses worldwide, FIA’s member firms play a critical role in the reduction of systemic risk in global financial markets. For more information, visit http://www.fia.org.

2 SIFMA is the voice of the U.S. securities industry. We represent the broker-dealers, banks and asset managers whose nearly 1 million employees provide access to the capital markets, raising over $2.5 trillion for businesses and municipalities in the U.S., serving clients with over $18.5 trillion in assets and managing more than $67 trillion in assets for individual and institutional clients including mutual funds and retirement plans. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit http://www.sifma.org.

3 82 Fed. Reg. 21,330 (May 8, 2017).

4 See 17 C.F.R. § 240.15Fk-1.

5 See FINRA Rule 3130.