I support the proposed rulemaking to establish a program for whistleblowers as mandated by the Dodd-Frank Act. Congress enacted these provisions to incentivize whistleblowers to come forward with new information about potential fraud in the financial markets. The proposed rulemaking authorizes the Commission to provide a monetary award to whistleblowers when their original information results in a successful enforcement action. The rule also provides that moneys recovered will fund new customer educations initiatives to protect the public. The proposed rules encourage persons with knowledge to come forward and assist the Commission in identifying, investigating and prosecuting potential violations of the Commodity Exchange Act.
Registration Process for Swap Dealers and Major Swap Participants Rulemaking
I support the proposed rulemaking to establish a process for the registration of swap dealers and major swap participants. This proposal would implement Congress’s mandate that these entities be subject to registration and regulation for their swaps business. Registration will enable the Commission to monitor swap dealers and major swap participants for compliance with the Dodd-Frank Act and Commission rulemakings. Through regulation of the dealers, the Commission will be able to protect market participants and the public and promote sound risk management practices. The proposal includes a requirement that swaps dealers and major swap participants register with a registered futures association, such as the National Futures Association. This would provide the Commission with flexibility with regard to its oversight of swap dealers and major swap participants for compliance with the Dodd-Frank Act.
I support the proposed rulemaking to implement a registration system for Foreign Boards of Trade (FBOTs) seeking to offer market participants in the United States direct access to the FBOTs’ trading systems. This registration system replaces the agency’s current practice of issuing no-action letters to such FBOTs. Importantly, this will bring consistency and transparency to the Commission’s oversight of such entities. Today’s proposal also provides that FBOTs subject to comparable, comprehensive supervision and regulation in their home country and that meet conditions outlined in the proposal would be allowed to make available swaps contracts through direct access to U.S. market participants.
Risk Management Policies of Swap Dealers and Major Swap Participants
I support the proposed business conduct standards rulemaking that establishes risk management policies for swap dealers and major swap participants. One of the primary goals of the Dodd-Frank Act was to bring swap dealers and major swap participants under comprehensive regulation to reduce risk to the financial system and to the economy as a whole. The proposed rules are consistent with the Congressional requirement that swap dealers and major swap participants: (1) monitor trading to prevent violations of position limits; (2) establish risk management procedures for managing their day-to-day business; (3) disclose to the Commission and to applicable prudential regulators general information relating to trading practices and financial integrity of swaps; (4) establish and enforce internal systems and procedures to obtain information needed to perform all of the duties prescribed; (5) implement conflicts of interest systems and procedures; and (6) refrain from unreasonably restraining trade or imposing an anticompetitive burden on trading or clearing.
Firewalls Conflicts-of-Interest Policies and Procedures
I support the proposed rulemakings that establish firewalls to ensure a separation between the research arm, the trading arm and the clearing activities of swap dealers, major swap participants, futures commission merchants and introducing brokers. This rule proposal relates to the conflicts-of-interest provisions of the Dodd-Frank Act that direct swap dealers and major swap participants to have appropriate informational partitions. The proposal builds upon similar protections in the securities markets as mandated in the Sarbanes-Oxley Act. The proposed rules will protect market participants and the public while also promoting the financial integrity of the marketplace.
Designation of Chief Compliance Officer Rulemaking
I support the proposed rulemaking establishing requirements for the designation, qualifications and duties of a chief compliance officer of swap dealers, major swap participants and futures commission merchants. These rules are intended to ensure that sufficient resources are devoted to compliance with laws and regulations, which is a core component of sound risk management practices. The proposed rules fulfill the Dodd-Frank Act’s requirements that intermediaries have chief compliance officers and establish and administer compliance policies, as well as resolve certain conflicts of interest.
Last Updated: February 17, 2011