CFTC Issues No-Action Letter Providing Registration Relief to Certain Introducing Brokers and Commodity Trading Advisors Involved in Swaps Activities
The CFTC Division of Swap Dealer and Intermediary Oversight ("DSIO") announced that it is taking a no-action position which provides relief from introducing broker ("IB") and commodity trading advisor registration requirements to certain parties who intermediate swaps for affiliates. The relief is available to registered swap dealers and institutions that are not registered with the CFTC (but are registered with, or regulated by, another financial regulator) who intermediate swaps for an affiliated swap dealer or de minimis swap dealer. The relief, which is also available to employees of these intermediaries, is subject to a number of conditions, including that the affiliate intermediary and the swap dealer or de minimis swap dealer undertake to be jointly and severally liable for violations of the CEA or the CFTC's regulations and that the affiliate intermediary and relevant employees are not subject to statutory disqualifications. In addition, the DSIO announced an interpretive position that an employee of a de minimis swap dealer who engages in swap activities on behalf of its employer would not be considered by DSIO to be an IB.
View CFTC Letter 12-70.
Commentary
This eleventh-hour relief typifies much of the recent CFTC output: last-minute, cramped and complicated. As such, it is likely to engender further questions. In particular, the condition that any commodity interest trading advice be solely incidental to the conduct of the regulated business of the intermediary (rather than the business of the swap dealer for whom the affiliate is providing intermediation) is likely to raise questions.