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CFTC Approves Proposal to "Modernize" Annual Recordkeeping Requirements

Steven.Lofchie@cwt.com's picture
Commentary by Steven Lofchie

The CFTC approved proposed amendments to CFTC Rule 1.31 ("Books and Records, Keeping and Inspection"). The amendments are intended to modernize recordkeeping obligations.

The amendments update recordkeeping requirements for all books and records that must be kept in accordance with CEA and CFTC rules. The amendments eliminate outdated provisions of the rule in light of evolving changes in the technology for storing records. The amendments rescind the requirements that paper records must be kept in their original form, and that electronic records must retain the format in which they were created. Further, the amendment removes a requirement that a person who uses only electronic storage media to preserve required records must enter into an arrangement with a third-party technical consultant who can furnish the CFTC with the information promptly upon request. The CFTC stated that the proposed amendments will "modernize and make technology-neutral the form and manner in which regulatory records must be kept."

In a related statement on the amendments, CFTC Chair Timothy Massad observed that modern times demand modernized requirements:

"In this age where terabytes of storage easily fit in one's pocket, our rules should not refer to microfiche or require paper records."

Commentary

Recordkeeping requirements are a major expense for many firms, and the records themselves are often difficult to maintain. Firms should scrutinize these CFTC amendments closely. In light of the CFTC's update of the recordkeeping requirements, the SEC and other regulators might want to revisit their own.

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