The US Commodity Futures Trading Commission has published more opinions about certain requirements applicable to swap dealers, futures commission merchants and major swap participants, many of whom work for private banks.

The so-called 'advisory' that the CFTC has circulated makes reference to the Code of Federal Regulations (CFR) and, in summary, it calls for the following things.

The standard of materiality (i.e. whatever standard a firm uses to decide whether something is significant or 'material') should be included in the CCO Annual Report’s discussion of material non-compliance issues under s3.3(e)(5) 17 CFR.

The CFTC's Division of Swap Dealer and Intermediary Oversight says that a certification statement that varies from the exact language in s3.3(f)(3) fails to satisfy the certification obligation rendering the CCO's Annual Report non-compliant with s3.3(f)(3). The DSIO wants every swap dealer, futures commission merchant and major swap participant to include 'discussions' of (musings about) potential or prospective changes or improvements in a stand-alone section in that report.

Swap dealers, futures commission merchants and major swap participants that are reporting compliance issues that do not rise to the level of material non-compliance should report those issues as areas for improvement.

When a chief compliance officer tells the CFTC about changes he wants to make to surmount problems in financial, managerial, operational, and staffing resources, he should include information specific to the firm in his annual report. Budget and staffing information that is provided by his firm's parent firm is not enough to satisfy the reporting requirements of s3.3(e)(4). For example, a firm that has more than one registered swap dealer or futures commission merchant must make an effort to provide budget and staffing information for each one in their respective CCO annual reports.

If a swap dealer, futures commission merchant or major swap participant is unable to provide precise numerical budget and staffing information related to compliance with the Commodity Exchange Act and the CFTC’s regulations, it should make a reasonable effort to estimate the portion of the aggregated numerical information that it dedicates to such compliance.

With respect to compliance-oriented software, the most useful 'discussions' ought to include a description of the software being used for compliance purposes, including the name of the software product, how people use it and how it fits into the firm’s overall regulatory compliance effort. This is in line with s3.3(e)(4) which requires the annual report to mention the firm's operational resources.

Commission regulation 3.3(f)(1) obliges the CCO to send his annual report to the audit committee, if there is one. If there is not, he should log that fact in the report.

In one case the CFTC seems to want to see less information rather than more. By regulation 3.3(e)(6) it requires each CCO to include a description of any material changes to compliance policies and procedures in the annual report.