U.S. COMMODITY FUTURES TRADING COMMISSION

Three Lafayette Centre

1155 21st Street, NW, Washington, DC 20581

Telephone: (202) 418-5977

Facsimile: (202) 418-5407

gbarnett@cftc.gov

Division of Swap Dealer and

Intermediary Oversight

Gary Barnett

Director

CFTC Letter No. 13-32

No-Action

June 26, 2013

Division of Clearing and Intermediary Oversight

Barbara Wierzynski

General Counsel

Futures Industry Association

2001 Pennsylvania Avenue NW

Suite 600

Washington, DC 20006-1823

Re: Request for Time-Limited No-Action Relief for Certain Swap Dealers from 

Compliance with Requirements of Commission Regulation 3.3 Relating to Annual 

Reports by Chief Compliance Officers

Dear Ms. Wierzynski:

This letter is in response to your letter, dated June 24, 2013, to the Division of Swap 

Dealer and Intermediary Oversight (“Division”) of the U.S. Commodity Futures Trading 

Commission (“Commission”), submitted on behalf of certain member firms of the Futures 

Industry Association (“FIA”) that are provisionally registered swap dealers (“SDs”).1 In that 

letter, you requested no-action relief with respect to compliance with certain requirements in 

Commission Regulation 3.3 relating to the Chief Compliance Officer (“CCO”) Annual Report 

(defined below). Your request for no-action relief was limited to SDs that: (1) are not registrants 

of the Securities and Exchange Commission (“SEC”) or regulated by a U.S. prudential regulator;

and (2) ended their fiscal year on March 31, 2013 (“Covered Firms”).

Regulatory Background

Section 731 of the Dodd-Frank Wall Street Reform and Consumer Protection Act,

2

in 

relevant part, added Section 4s(k) of the Commodity Exchange Act (“Act”),

3 which requires 

each SD to designate an individual to serve as its CCO. Section 4s(k) requires that CCOs

 

1 The relief provided in this no-action letter is extended to all similarly-situated SDs, subject to the conditions and 

limitations set forth herein.

2

Pub. L. 111-203, 124 Stat. 1376 (2010).

3

7 U.S.C. § 1 et seq.
Futures Industry Association

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perform certain duties and responsibilities, including the preparation of an Annual Report “in 

accordance with rules prescribed by the Commission.”4

To implement that statutory provision, the Commission promulgated Commission 

Regulation 3.3, which, among other things, requires the designation of a CCO meeting certain 

qualifications and sets forth the duties and responsibilities of a CCO.5 One of the responsibilities 

of a CCO is to prepare and sign an Annual Report.6 The Annual Report must cover the most 

recently completed fiscal year of the SD, and at a minimum, must address the issues enumerated 

in Commission Regulation 3.3, including: 

 Contain a description of the written policies and procedures, including the code of ethics 

and conflicts of interest policies, of the SD;

 Review each applicable requirement under the Act and Commission Regulations, and 

with respect to each:

o Identify the policies and procedures that are reasonably designed to ensure 

compliance with the requirement under the Act and Commission Regulations;

o Provide an assessment as to the effectiveness of these policies and procedures; 

and

o Discuss areas for improvement, and recommend potential or prospective changes 

or improvements to its compliance program and resources devoted to compliance;

 List any material changes to compliance policies and procedures during the coverage 

period for the report;

 Describe the financial, managerial, operational, and staffing resources set aside for 

compliance with respect to the Act and Commission Regulations, including any material 

deficiencies in such resources; and

 Describe any material non-compliance issues identified, and the corresponding action 

taken.7

The Annual Report must also include a certification by the CCO or chief executive 

officer (“CEO”) of the SD that states that, to the best of his or her knowledge and reasonable 

belief, and under penalty of law, the information contained in the Annual Report is accurate and 

complete.8

 

4

7 U.S.C. § 4s(k)(3).

5 Commission Regulation 3.3 is applicable to futures commission merchants, swap dealers, and major swap 

participants. The relief provided in this no-action letter is not applicable to futures commission merchants and major 

swap participants, and thus, such firms are not discussed herein.

6

17 CFR 3.3(d)(6).

7

17 CFR 3.3(e).

8

17 CFR 3.3(f)(3).
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Prior to furnishing the Annual Report to the Commission, the CCO must provide the 

Annual Report to the board of directors or the senior officer of the SD for its review, and record 

such action in the board minutes or otherwise, as evidence of compliance with the requirement.

9

 

The Annual Report generally must be furnished electronically to the Commission not 

more than 90 days after the end of the fiscal year of the SD, simultaneously with the submission 

of Form 1-FR-FCM, the Financial and Operational Combined Uniform Single Report (“FOCUS 

Report”), or the financial condition report, as applicable.10

However, the actual date on which the first Annual Report must be filed by an SD may 

vary, depending upon whether the firm is regulated by a U.S. prudential regulator or is a 

registrant of the SEC. For instance, an SD that is not regulated by a U.S. prudential regulator 

and is not a registrant of the SEC was required to comply with Commission Regulation 3.3 by 

the later of March 29, 2013, or the date on which the SD was required to apply for registration.11 

Thus, pursuant to Commission Regulation 3.3, a CCO of an SD that was required to apply for 

registration by December 31, 2012, and which had a fiscal year-end of March 31, 2013, is 

required to prepare an Annual Report, and furnish such Report to the Commission, by July 1, 

2013.

12

Requested No-Action Relief

On behalf of the Covered Firms, you have requested no-action relief for each Covered 

Firm that fails to be fully compliant with Commission Regulation 3.3, if the Annual Report 

prepared by such Covered Firm’s CCO for the fiscal year ending on March 31, 2013, does not 

satisfy the requirements of Commission Regulation 3.3(e) in its entirety, provided that it satisfies 

certain requirements. Specifically, you have requested that, with respect to the Section 4s 

Implementing Regulations to be covered in the Annual Report, Covered Firms need only address 

those regulations that satisfy all of the following criteria:

 The regulation has an effective compliance date on or before March 31, 2013; and

 No-action relief allowing Covered Firms to delay compliance with the regulation until 

March 31, 2013, or thereafter has not been issued.

 

9

17 CFR 3.3(f)(1).

10 17 CFR 3.3(f)(2).

11 See Swap Dealer and Major Swap Participant Recordkeeping, Reporting, and Duties Rules; Futures Commission 

Merchant and Introducing Broker Conflicts of Interest Rules; and Chief Compliance Officer Rules for Swap 

Dealers, Major Swap Participants, and Futures Commission Merchants, 77 Fed. Reg. 20128, 20166 (Apr. 3, 2012).

12 The 90-day period ends on a Saturday (June 29, 2013). Accordingly, the deadline for electronically furnishing the 

Annual Report to the Commission is Monday, July 1, 2013.
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Your request included a list of the Section 4s Implementing Regulations that the first Annual 

Report would be required to cover.13

Additionally, you have requested that the Annual Report need only satisfy the following 

requirements:

 The Annual Report contains the following information:

o An introduction and an executive summary that contains:

 A description of the Covered Firm’s business.

 Identification of the CEO and CCO of the Covered Firm.

 The time period covered by the Annual Report.

o A review of policies and procedures reasonably designed to ensure compliance 

with the Commission regulations, as set forth in Schedule 1 of your June 24, 2013 

letter requesting no-action relief,

14 as follows:

 Identification and description of such policies and procedures required as 

of March 31, 2013.

 Assessment of the effectiveness of such policies and procedures as of 

March 31, 2013.

 Discussion of areas for improvement of such policies and procedures.

o A description of any material noncompliance issues identified and the 

corresponding action taken in relation to the Commission regulations set forth in 

Schedule 1 of your June 24, 2013 letter.

15

o CEO and/or CCO Certification(s) that states the following: “To the best of my 

knowledge and reasonable belief, and under penalty of law, the information 

contained in the attached annual report pertaining to the period from March 29, 

2013, through March 31, 2013 is accurate and complete.”

 The Annual Report covers the first three months of 2013, but the certification by the 

CCO and/or CEO is limited to the period from March 29, 2013, through March 31, 2013.

 The Covered Firm satisfies the requirements of Commission Regulations 3.3(f)(1) and 

(f)(4).

In requesting no-action relief, you note that the legal and compliance resources of swap 

dealers are severely constrained at the present time, as such firms continue to devote

 

13 Schedule 1 of your June 24, 2013 letter identified the following regulations to be covered in the first Annual 

Report: 

3.1, 3.3, 23.201 (except 23.201(a)(1) and 23.201(b)(3)(ii)), 23.202 (excluding CFTC Letter No. 12-29), 23.203,

23.204, 23.205, 23.400, 23.401, 23.410(a)-(b), 23.431(d), 23.433, 23.434(a)(1), 23.451, 23.500, 23.501, 23.503,

23.506, 23.600, 23.601, 23.602, 23.603, 23.605 (c)-(d), 23.606, 23.607, 23.608, 23.609, 23.610.

14 For a list of applicable rules, see id.

15 Id. 
Futures Industry Association

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considerable resources toward developing policies and procedures to ensure compliance with all 

of the Commission regulations implementing Section 4s of the Commodity Exchange Act. You 

also note that the CCO of a Covered Firm will have very little time to prepare the Annual Report 

between the compliance date of Regulation 3.3 (March 29, 2013) and the July 1, 2013 deadline 

for furnishing the Annual Report to the Commission.

Time-Limited No-Action Relief Granted

Based on the foregoing and the representations made in your letter requesting no-action 

relief, the Division believes that granting time-limited no-action relief is warranted. 

Accordingly, the Division will not recommend that the Commission take an enforcement action 

against a Covered Firm that submits an Annual Report for the fiscal year that ends on March 31, 

2013, that fails to satisfy the requirements of Commission Regulation 3.3(e) and (f), if, at a 

minimum, the following conditions are satisfied with respect to such Annual Report:

16

 The Annual Report contains the following information:

o An introduction and an executive summary that contains:

 A description of the Covered Firm’s business.

 Identification of the CEO and CCO of the Covered Firm.

 The time period covered by the Annual Report (i.e., the time period 

between the date on which the Covered Firm was required to register as a 

SD, and March 31, 2013).

o A review of policies and procedures reasonably designed to ensure compliance 

with the Commission regulations, as set forth in Schedule 1 of your June 24, 2013 

letter requesting no-action relief,17 as follows:

 Identification and description of such policies and procedures required as 

of March 31, 2013.

 Assessment of the effectiveness of such policies and procedures as of 

March 31, 2013.

 Discussion of areas for improvement of such policies and procedures.

o A description of any material noncompliance issues identified and the 

corresponding action taken in relation to the Commission regulations set forth in 

Schedule 1 of your June 24, 2013 letter.

18

o CEO and/or CCO Certification(s) that states the following: “To the best of my 

knowledge and reasonable belief, and under penalty of law, the information 

contained in the attached annual report pertaining to the period from March 29, 

2013, through March 31, 2013 is accurate and complete.”

 

16 Although the no-action relief was requested only with respect to paragraph (e) of Regulation 3.3, the Division is 

providing no-action relief covering paragraph (f) of Regulation 3.3 as well.

17 See supra note 13. As requested in your letter, Covered Firms need only address those regulations that satisfy the 

following criteria: (1) The regulation has an effective compliance date on or before March 31, 2013; and (2) noaction relief allowing Covered Firms to delay compliance with the regulation until March 31, 2013, or thereafter has 

not been issued.

18 Id. 
Futures Industry Association

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 The Annual Report covers the time period from the date on which the Covered Firm was 

required to apply for registration as an SD, through the Covered Firm’s fiscal year end

(March 31, 2013), but the CEO/CCO certification is limited to the period from March 29, 

2013, through March 31, 2013.

 The Annual Report is electronically furnished to the Commission no later than 90 days 

after the Covered Firm’s fiscal year end.

 The Covered Firm satisfies the requirements of Commission Regulations 3.3(f)(1) and 

(f)(4). 

This no-action relief is limited only to the first Annual Report required to be furnished by 

a Covered Firm to the Commission for the fiscal year that ends on March 31, 2013.

This letter, and the positions taken herein, represent the view of this Division only, and 

do not necessarily represent the position or view of the Commission or of any other office or 

division of the Commission. The relief issued by this letter does not excuse persons relying on it 

from compliance with any other applicable requirements contained in the Act or in the 

Regulations issued thereunder. Further, this letter, and the relief contained herein, is based upon 

the representations made to the Division. Any different, changed or omitted material facts or 

circumstances might render this no-action relief void.

Should you have any questions, please do not hesitate to contact Frank Fisanich, Chief 

Counsel, at 202-418-5949, or Ward Griffin, Associate Chief Counsel, at 202-418-5425.

Very truly yours,

Gary Barnett

Director

Division of Swap Dealer and

Intermediary Oversight

cc: Regina Thoele, Compliance

National Futures Association, Chicago

Jamila A. Piracci, OTC Derivatives

National Futures Association, New York