§ 242.831 Core Principle 14—Designation of chief compliance officer. ( a ) ( 1 ) *In general.* Each security-based swap execution facility shall designate an individual to serve as a chief compliance officer.
( 2 ) *Duties.* The chief compliance officer shall: ( i ) Report directly to the board or to the senior officer of the facility;
( ii ) Review compliance with the core principles in this subsection;
( iii ) In consultation with the board of the facility, a body performing a function similar to that of a board, or the senior officer of the facility, resolve any conflicts of interest that may arise;
( iv ) Be responsible for establishing and administering the policies and procedures required to be established pursuant to this section;
( v ) Ensure compliance with the Act and the rules and regulations issued under the Act, including rules prescribed by the Commission pursuant to section 3D of the Act;
( vi ) Establish procedures for the remediation of noncompliance issues found during compliance office reviews, look backs, internal or external audit findings, self-reported errors, or through validated complaints; and
( vii ) Establish and follow appropriate procedures for the handling, management response, remediation, retesting, and closing of noncompliance issues.
( 3 ) *Annual reports* — ( i ) *In general.* In accordance with rules prescribed by the Commission, the chief compliance officer shall annually prepare and sign a report that contains a description of: ( A ) The compliance of the security-based swap execution facility with the Act; and
( B ) The policies and procedures, including the code of ethics and conflict of interest policies, of the security-based swap execution facility.
( ii ) [Reserved]
( 4 ) *Requirements.* The chief compliance officer shall: ( i ) Submit each report described in paragraph (a)(3) of this section with the appropriate financial report of the security-based swap execution facility that is required to be submitted to the Commission pursuant to this section; and
( ii ) Include in the report a certification that, under penalty of law, the report is accurate and complete.
( b ) *Authority of chief compliance officer.* ( 1 ) The position of chief compliance officer shall carry with it the authority and resources to develop, in consultation with the governing board or senior officer, the policies and procedures of the security-based swap execution facility and enforce such policies and procedures to fulfill the duties set forth for chief compliance officers in the Act and the Commission's rules thereunder.
( 2 ) The chief compliance officer shall have supervisory authority over all staff acting at the direction of the chief compliance officer.
( c ) *Qualifications of chief compliance officer.* ( 1 ) The individual designated to serve as chief compliance officer shall have the background and skills appropriate for fulfilling the responsibilities of the position.
( 2 ) No individual that would be disqualified from serving on a security-based swap execution facility's governing board or committees pursuant to the criteria set forth in § 242.819(i) may serve as a chief compliance officer.
( 3 ) In determining whether the background and skills of a potential chief compliance officer are appropriate for fulfilling the responsibilities of the role of the chief compliance officer, a security-based swap execution facility has the discretion to base its determination on the totality of the qualifications of the potential chief compliance officer, including, but not limited to, compliance experience, related career experience, training, potential conflicts of interest, and any other relevant factors to the position.
( d ) *Appointment and removal of chief compliance officer.* ( 1 ) Only the governing board or the senior officer may appoint or remove the chief compliance officer.
( 2 ) The security-based swap execution facility shall notify the Commission within two business days of the appointment or removal, whether interim or permanent, of a chief compliance officer.
( e ) *Compensation of the chief compliance officer.* The governing board or the senior officer shall approve the compensation of the chief compliance officer.
( f ) *Annual meeting with the chief compliance officer.* The chief compliance officer shall meet with the governing board or senior officer of the security-based swap execution facility at least annually.
( g ) *Information requested of the chief compliance officer.* The chief compliance officer shall provide any information regarding the regulatory program of the security-based swap execution facility as requested by the governing board or the senior officer.
( h ) *Duties of chief compliance officer.* The duties of the chief compliance officer shall include, but are not limited to, the following: ( 1 ) Overseeing and reviewing compliance of the security-based swap execution facility with section 3D of the Act and the Commission rules thereunder;
( 2 ) Taking reasonable steps, in consultation with the governing board or the senior officer of the security-based swap execution facility, to resolve any material conflicts of interest that may arise, including, but not limited to: ( i ) Conflicts between business considerations and compliance requirements;
( ii ) Conflicts between business considerations and the requirement that the security-based swap execution facility provide fair, open, and impartial access as set forth in § 242.819(c); and
( iii ) Conflicts between a security-based swap execution facility's management and members of the governing board;
( 3 ) Establishing and administering written policies and procedures reasonably designed to prevent violations of the Act and the rules of the Commission;
( 4 ) Taking reasonable steps to ensure compliance with the Act and the rules of the Commission;
( 5 ) Establishing procedures reasonably designed to handle, respond, remediate, retest, and resolve noncompliance issues identified by the chief compliance officer through any means, including any compliance office review, look-back, internal or external audit finding, self-reported error, or validated complaint;
( 6 ) Establishing and administering a compliance manual designed to promote compliance with the applicable laws, rules, and regulations and a written code of ethics for the security-based swap execution facility designed to prevent ethical violations and to promote honesty and ethical conduct by personnel of the security-based swap execution facility;
( 7 ) Supervising the regulatory program of the security-based swap execution facility with respect to trade practice surveillance; market surveillance; real-time market monitoring; compliance with audit trail requirements; enforcement and disciplinary proceedings; audits, examinations, and other regulatory responsibilities (including taking reasonable steps to ensure compliance with, if applicable, financial integrity, financial reporting, sales practice, recordkeeping, and other requirements); and
( 8 ) Supervising the effectiveness and sufficiency of any regulatory services provided to the security-based swap execution facility by a regulatory service provider in accordance with § 242.819(e).
( i ) *Preparation of annual compliance report.* The chief compliance officer shall, not less than annually, prepare and sign an annual compliance report that covers the prior fiscal year. The report shall, at a minimum, contain: ( 1 ) A description and self-assessment of the effectiveness of the written policies and procedures of the security-based swap execution facility, including the code of ethics and conflict of interest policies, to reasonably ensure compliance with the Act and applicable Commission rules;
( 2 ) Any material changes made to compliance policies and procedures during the coverage period for the report and any areas of improvement or recommended changes to the compliance program;
( 3 ) A description of the financial, managerial, and operational resources set aside for compliance with the Act and applicable Commission rules;
( 4 ) Any material non-compliance matters identified and an explanation of the corresponding action taken to resolve such non-compliance matters; and
( 5 ) A certification by the chief compliance officer that, to the best of their knowledge and reasonable belief, and under penalty of law, the annual compliance report is accurate and complete in all material respects.
( j ) *Submission of annual compliance report and related matters* — ( 1 ) *Furnishing the annual compliance report prior to submission to the Commission.* Prior to submission to the Commission, the chief compliance officer shall provide the annual compliance report for review to the governing board or, in the absence of a governing board, to the senior officer. Members of the governing board and the senior officer shall not require the chief compliance officer to make any changes to the report.
( 2 ) *Submission of annual compliance report to the Commission.* The annual compliance report shall be submitted electronically to the Commission using the EDGAR system as an Interactive Data File in accordance with § 232.405 of this chapter not later than 90 calendar days after the end of the security-based swap execution facility's fiscal year. The security-based swap execution facility shall concurrently file the annual compliance report with the fourth-quarter financial report pursuant to § 242.829(g).
( 3 ) *Amendments to annual compliance report.* ( i ) Promptly upon discovery of any material error or omission made in a previously filed annual compliance report, the chief compliance officer shall file an amendment with the Commission to correct the material error or omission. The chief compliance officer shall submit the amended annual compliance report to the governing board, or in the absence of a governing board, to the senior officer, pursuant to paragraph (j)(1) of this section.
( ii ) An amendment shall contain the certification required under paragraph (i)(5) of this section.
( 4 ) *Request for extension.* A security-based swap execution facility may request an extension of time to file its annual compliance report from the Commission. Reasonable and valid requests for extensions of the filing deadline may be granted at the discretion of the Commission.
( k ) *Recordkeeping.* A security-based swap execution facility shall maintain all records demonstrating compliance with the duties of the chief compliance officer and the preparation and submission of annual compliance reports consistent with § 242.826 (Core Principle 9).