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CFTC Adopts Rule Amendment to Clarify Certain Responsibilities of SDs and MSPs Regarding Employees (Pre-Fed. Reg. Version)

The CFTC announced the adoption of an amendment to CFTC Rule 23.22 ("Associated Persons of Swap Dealers and Major Swap Participants") to make clear that swap dealers ("SDs") and major swap participants ("MSPs") are not subject to the prohibition in CEA Section 4s(b)(6) ("Registration and Regulation of Swap Dealers and Major Swap Participants - Statutory Disqualification Prohibition") on associating with a person who is subject to a disqualification from registration under CEA Section 8a(2) or 8a(3) ("Registration of Commodity Dealers and Associated Persons; Regulation of Registered Entities") where the person is a clerical or ministerial employee.

As the CFTC attempts to clarify in its press release:

Section 4s(b)(6) of the Act provides that except to the extent otherwise specifically provided by the CFTC, it is unlawful for an SD or MSP to permit a person associated with it who is subject to a Statutory Disqualification to effect or be involved in effecting swaps transactions on its behalf if the SD or MSP knew, or in the exercise of reasonable care, should have known, of the Statutory Disqualification. CFTC Regulation 23.22 makes this prohibition generally applicable to associated persons of SDs and MSPs. However, CFTC Regulation 1.3(aa)(6) ("Definitions - Associated Person") excludes a person associated with an SD or MSP in a clerical or ministerial capacity from the "associated person" definition. To resolve any possible confusion between these two provisions, the CFTC is amending Regulation 23.22 to except clerical and ministerial employees from the Statutory Disqualification prohibition.

Click here to view CFTC final rule release.

Regulated Entities: