CFTC Adopts Internal Business Conduct Rules - Sullivan & Cromwell

econciliation, swap portfolio compression exercises and central clearing of a swap. Additionally, the
Internal Business Conduct Rules require an SD or MSP to keep a ledger reflecting various financial and
cash flow information.
The records required by the CEA and CFTC Regulations must be kept for five years after they are
created and must be “readily accessible” during the first two years. Records related to any swap or
related cash or forward transaction must be kept throughout the life of the transaction and for five years
thereafter (they must be “readily accessible” only during the life of the transaction and for the first two
years thereafter). Records of pre-execution oral communications need only be kept for one year. In the
Adopting Release, the Commission explained that the “readily accessible” standard requires that the
Commission or Department of Justice be able to inspect the records promptly upon request. During the
Open Meeting, Commissioner Chilton proposed an amendment in response to Commissioner O’Malia’s
comments concerning the technological feasibility of some of the recordkeeping rules. This amendment,
adopted in Final Rule 23.206, gives the Director of the Division of Swap Dealer and Intermediary
Oversight the authority to grant SDs and MSPs extensions for complying with the daily trade
recordkeeping requirements in Final Rule 23.202 if compliance would be technologically or economically
impracticable. During the extension time, an SD or MSP would not be considered in violation of any
registration requirements.
COMPLIANCE DATES
The Commission determined to require different compliance dates for the various rules included within
the Internal Business Conduct Rules. The Commission will require compliance at different dates
depending on whether an SD, MSP, FCM or IB is regulated by a U.S. prudential regulator or registered
with the SEC (for purposes of the list below, the term “Regulated” 22 will mean regulated by a U.S.
prudential regulator or registered with the SEC). The following summarizes the various compliance dates
for each type of entity:
Regulated SDs and MSPs must comply with the reporting, recordkeeping and daily trading records
rules by the later of 90 days after the Final Rules are published in the Federal Register (the
“Publication Date”) or the date on which SDs and MSPs are required to apply for registration pursuant
to § 3.10 (such date referred to hereinafter as the “3.10 Date”) and non-Regulated SDs and MSPs
must comply by the later of 180 days after the Publication Date or the 3.10 Date;
Regulated SDs and MSPs must comply with the risk management program rules by the later of 90
days after the Publication Date or the 3.10 Date and non-Regulated SDs or MSPs must comply by
the later of 180 days after the Publication Date or the 3.10 Date;
Regulated SDs and MSPs must comply with the rules relating to business continuity and disaster
recovery plans by the later of 180 days after the Publication Date or the 3.10 Date and non-Regulated
SDs and MSPs must comply by the later of 270 days after the Publication Date or the 3.10 Date;
All SDs or MSPs must comply with the rules relating to monitoring position limits, diligent supervision
structures, disclosure of general information and antitrust prevention by the later of 60 days after the
Publication Date (the “Effective Date”) or the 3.10 Date;
CFTC Adopts Internal Business Conduct Rules
March 8, 2012
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