Source: https://www.ropesgray.com/en/newsroom/alerts/2017/03/CFTC-Proposes-Updated-Recordkeeping-Rules
Timestamp: 2019-06-16 19:26:56
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CFTC Proposes Updated Recordkeeping Rules | Ropes & Gray LLP
CFTC Proposes Updated Recordkeeping Rules
The Commodity Futures Trading Commission (the “CFTC”) recently proposed certain amendments to Regulation 1.31 (“§1.31”),1 which sets forth requirements for records required to be kept under the Commodity Exchange Act (the “CEA”) and CFTC regulations. The proposed amendments would affect all persons required to maintain records under CFTC rules, including asset managers registered as commodity pool operators and commodity trading advisors, as well as certain other persons who trade commodity interests on U.S. markets. The proposal grants welcome relief from outdated requirements of the current rule and aims to make recordkeeping requirements technology-neutral in order to accommodate future advances. The CFTC requested comments on many issues. Comments are due by March 20, 2017.
Regulatory records will replace the term “books and records” as it is currently used. Other terms that have become obsolete are also struck, including “native file format,” “micrographic media” and “electronic storage media.” The definitional changes should allow the rule to be technology-neutral and, therefore, alleviate the burden of updating the rule to respond to future technological advances. The changes also clarify that both existing and prior versions of any record must be retained, no matter how modified. This means that metadata must be retained as part of required electronic recordkeeping.
2. Policies and Procedures. The rule proposal adds a new §1.31(b), which revises the ongoing compliance obligations regarding written regulatory records and procedures. If approved, §1.31(b) would require all records entities to establish, maintain and implement written policies and procedures reasonably designed to ensure that the records entity complies with its obligations under §1.31, including training officers and personnel and monitoring for compliance. Notably, the new rule does not prescribe specifics as to the frequency and format of any training. Rather, the CFTC views training as an ongoing responsibility, which a records entity “ignores at its peril.”
4. Form and Manner of Retention. In lieu of current §1.31’s specific statements about the form in which records must be kept, proposed §1.31(d) adopts only a general standard that records entities retain regulatory records “in a form and manner necessary to ensure the records’ and recordkeeping systems’ authenticity and reliability.” While it does not give specifics about the form in which records must be kept, the proposed rule does set forth the following requirements with respect to what records entities are required to do with respect to electronic regulatory records:
6. Removal of Certain Outdated Provisions. The proposal also would remove §1.31(b)(4)(i), requiring the hiring of and submission of reports by technical advisers; §1.31(c), requiring users of electronic storage media, including disks and CD-ROMs, to file a certification of the documents’ authenticity; and §1.31(d), requiring certain paper records such as trading cards and paper copies of electronically filed certified forms, to be retained in hard copy for the required period.
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1. 17 CFR §1.31.