December 22, 2020
Effective date for Interpretive Notice establishing SD supervision requirements over use of marketing materials
NFA recently adopted an Interpretive Notice entitled NFA Compliance Rule 2-9(d) Swap Dealer and Major Swap Participant Supervision of the Use of Marketing Materials. The Interpretive Notice provides guidance to swap dealer (SD) Members regarding their regulatory obligations under Compliance Rule 2-9(d) related to their use of marketing materials. The Interpretive Notice is based on supervisory principles that are tailored to reflect that SD Members conduct business exclusively with counterparties that qualify as eligible contract participants and negotiate bilateral, bespoke swaps tailored to a counterparty’s specific needs. The Interpretive Notice will become effective on May 31, 2021.
NFA Compliance Rule 2-9(d) places a continuing responsibility on each SD Member to diligently supervise its employees and agents in the conduct of their swap activities for or on behalf of the Member. Compliance Rule 2-9(d) is broadly written to provide each firm with some degree of flexibility in determining what constitutes “diligent supervision” and in developing and implementing written supervisory procedures tailored to meet the Member’s particular needs. Although NFA leaves the exact form of supervision to the SD Member, all SD Members are required to have written policies and procedures designed to achieve ongoing compliance with applicable NFA and CFTC requirements. In discharging their supervisory obligations, SD Members should have written policies and procedures (supervisory program) governing the use of marketing materials if they provide marketing materials to counterparties and potential counterparties.
The Interpretive Notice requires an SD Member to adopt a supervisory program that is designed to reasonably ensure that marketing materials comply with all applicable NFA and CFTC requirements including rules related to fraudulent and deceptive practices. While SDs have flexibility in designing their programs, the Interpretive Notice requires that an adequate supervisory program include policies and procedures related to:
- Review and approval of marketing materials;
- Training; and
NFA’s Swap Participant Advisory Committee supported this Interpretive Notice, which was unanimously approved by the Board.
More information regarding the Interpretive Notice can be found in NFA’s December 2, 2020 submission letter to the CFTC. If you have any questions related to the Interpretive Notice please contact Mike Otten, Vice President, OTC Derivatives (email@example.com or 212-513-6046).
Source: National Futures Association