ARTICLE
7 December 2016

CFTC Allows FCMs And IBs To Consolidate Risk Disclosure Documents

CW
Cadwalader, Wickersham & Taft LLP

Contributor

Cadwalader, established in 1792, serves a diverse client base, including many of the world's leading financial institutions, funds and corporations. With offices in the United States and Europe, Cadwalader offers legal representation in antitrust, banking, corporate finance, corporate governance, executive compensation, financial restructuring, intellectual property, litigation, mergers and acquisitions, private equity, private wealth, real estate, regulation, securitization, structured finance, tax and white collar defense.
The CFTC Division of Swap Dealer and Intermediary Oversight granted no-action relief to FCMs and introducing IBs by allowing them to provide non-institutional customers with a single-risk disclosure document...
United States Finance and Banking

The CFTC Division of Swap Dealer and Intermediary Oversight granted no-action relief to futures commission merchants ("FCMs") and introducing brokers ("IBs") by allowing them to provide non-institutional customers with a single-risk disclosure document that consolidates the separate risk disclosure statements required by CFTC Rules 1.55, 30.6, 33.7 and/or 190.10. In its request for no-action relief, the Futures Industry Association explained that providing two separate risk disclosure statements to non-institutional customers that contain substantially similar risk disclosure information is unnecessary and potentially confusing to customers.

Commentary

With this bit of good housekeeping ‎out of the way (though codifying the relief directly in the CFTC rules would have been better), perhaps the CFTC now can turn its attention to rationalizing the three different definitions of "U.S. person" in Rules 3.10(c)(3)(i) and 4.7, and in the Cross-Border swap guidance, so that they reflect one conception of that term. Even better, the CFTC might seek to reconcile the definition of "U.S. person" in its swap "guidance" with that of the SEC rule. Since the CFTC never issued an actual rulemaking on cross-border issues, it should be relatively straightforward for a new CFTC Chair to revise the CFTC's definition so that it matches the SEC's more carefully drawn definition of the same term.

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