The CFTC Division of Swap Dealers and Intermediary Oversight ("DSIO") acknowledged that the DSIO's recently issued Advisory ("Advisory") on chief compliance officers' ("CCOs") annual reports for swap dealers, futures commission merchants, and major swap participants "may present challenges for [COOs] of registered firms to adapt their existing reporting procedures in time to produce the [2019] reports in 2020."
In a newly published statement, the DSIO clarified that it expects CCOs to "take reasonable measures" to implement the recommendations for their 2019 annual compliance reports. The DSIO also stated that the advisory is intended to serve as guidance and "does not impose any new requirements." Therefore, the DSIO specified that it expects CCOs to "more completely" address the recommendations in their 2020 annual reports.
Commentary
This is a less-than-ideal manner of regulation. One can sympathize with the DSIO and the good intentions of providing timely guidance to regulated entities. However, compliance departments at regulated entities cannot casually treat regulatory statements as "merely guidance" to be disregarded if inconvenient. It should not come as a surprise that the Advisory was seen as imposing new requirements. Even the CFTC's statement that the Advisory "does not impose any new requirements" may be less comforting than discomfiting as it suggests that a firm's failure to comply with the Advisory would be a violation of existing law.
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