Author: Preshina Pramee

CFTC Extends No-Act SEFs and DCMs from Certain CFTC Regulations for Correction of Errors

Washington, DC — Today, a no-action letter issued by the U.S. Commodity Futures Trading Commission’s (CFTC) Division of Market Oversight and Division of Clearing and Risk (Divisions) will serve as an extension to the relief granted in CFTC Letter No. 16-58 which will be expiring on June 15, 2017. In addition to the no-action letter providing relief from certain CFTC regulations to allow swap execution facilities (SEFs) and designated contract markets (DCMs) to rectify clerical or operational errors that resulted in a swap being rejected for clearing and consequently becoming void, it also permits SEFs and DCMs to amend clerical or operational errors brought to light after a swap has been cleared.

In order to enable SEFs and DCMs to correct clerical or operational errors that result in a swap being rejected for clearing, the Divisions will recommend that the CFTC to not take any enforcement action against a SEF or DCM for a lack of compliance with  the required methods of execution in CFTC Regulations 37.9(a)(2) and 38.500 as well as the prohibition against pre-arranged trading in CFTC Regulations 37.203 and 38.152 provided that within one hour after a trade has been rejected for clearing, the SEF or DCM corrects all errors by allowing a new, pre-arranged trade with terms and conditions that comply with the terms and conditions of the original trade.

The relief also caters to operational and clerical errors that have only been discovered after the swap has been cleared to be corrected.  The Divisions will not recommend that the CFTC engage in any enforcement action against a SEF or DCM for failure to comply with the required methods of execution in CFTC Regulations 37.9(a)(2) and 38.500 and the prohibition against pre-arranged trading in CFTC Regulations 37.203 and 38.152 if, after a trade has been cleared and an error is discovered, the SEF or DCM permits a pre-arranged trade between the original parties that counteracts the swaps carried on the DCO’s books. To read more, please click here.

CFTC Announces Stronger Anti-Retaliation Protections for Whistleblowers and Enhanced Award Claims Review Process

Washington, DC –  A unanimous vote by the U.S. Commodity Futures Trading Commission (CFTC) to amend Whistleblower Rules has resulted in, among other things, stronger anti-retaliation protections for whistleblowers as well as enhanced processes for reviewing whistleblower claims.

A reinterpretation of the CFTC’s anti-retaliation authority under the Commodity Exchange Act (CEA) concludes that the CFTC or the whistleblower may now seek legal remedies against an employer for retaliation against a whistleblower. Steps taken by an employer that deliberately restricts an employee from direct communication with the CFTC pertaining to a possible violation of the CEA by way of a confidentiality, pre-dispute arbitration or similar agreement are strictly prohibited by the amendment.

In a recent press release, Director of the Division of Enforcement, James McDonald said “The Whistleblower Program is an integral part of the Division’s efforts to identify and prosecute unlawful conduct. The Commission’s approval of these rules today will further strengthen and enhance our efforts to protect customers and promote market integrity.”

While Part 165 of CFTC’s Regulations outlines the agency’s basic framework of the Whistleblower Program the basic framework, the new amendments not only strengthen anti-retaliation protections but will also add efficiency and transparency to the process of determining whistleblower award claims. Furthermore, it will also harmonize the CFTC’s rules with those of the  of the agency’s Whistleblower Program. In addition to strengthening anti-retaliation protections, the new amendments will add the U.S. Securities and Exchange Commission’s whistleblower program.

Additional changes as a result of the amendments include replacing the Whistleblower Award Determination Panel with a Claims Review Staff which will consider and issue Preliminary Determination in the granting and denial of claims. As such, whistleblowers will have an opportunity to view and contest the Preliminary Determination prior to  the CFTC issuing a Final Determination.

Other key changes that have occurred due to the amendments are whistleblower eligibility requirements also make changes to other key areas, such as whistleblower eligibility requirements and authorizing the Whistleblower office to handle a handle facially ineligible award claims that do not pertain to a Notice of Covered Action, a final judgment in a Related Action, or a previously filed Form TCR (Tip, Complaint or Referral).