Financial Regulatory Forum

CFTC adopts final rule requiring firms to save their oral communications

By Guest Contributor
December 19, 2012

By Emmanuel Olaoye, Compliance Complete

WASHINGTON/NEW YORK, Dec. 19 (Thomson Reuters Accelus) – The Commodity Futures Trading Commission on Monday approved a final rule that would require firms registered with the agency to record the oral communications of their brokers for up to a year.

Firms would have to start recording conversations on telephones, voicemail, cell-phones and other media if they trade in a “commodity interest”. 

The CFTC describes commodity interests as commodity futures contracts, commodity options, swaps, and forex contracts.

The rule affects futures commission merchants, introducing brokers, and retail forex dealers with more than $5 million in gross revenues. Commodity pool operators, floor traders, and floor brokers that trade for themselves are exempt from the rule.

The agency said it was issuing the final rule to integrate the recordkeeping requirements for futures commission merchants with those in the Dodd-Frank Act. Dodd-Frank expanded the CFTC’s powers to regulate swaps and other over-the-counter derivatives.

“The rule will make enforcement investigations more efficient by preserving critical evidence that otherwise may be lost to memory lapses and inconsistent recollections,” said CFTC Chairman Gary Gensler.

“The Commission will have access to evidence of fraud and market manipulation, which is expected to increase the success of enforcement actions for the benefit customers, market participants and the markets. Moreover, it also will protect customers from abusive sales practices, lower the risk of transactional disputes and allow registrants to follow-up more effectively on customer complaints.”

Firms affected by the final rule must record all their oral communications as well as maintain paper records for up to a year. They are not required to develop an identification system for their trading counterparties but they must store the information in a way that is “verifiable and searchable,” the CFTC said.

The rule will be effective 365 days after its publication in the federal register.

More details about the final rule are available in a Factsheet and Questions and Answers document released by the CFTC.

(This article was produced by the Compliance Complete service of Thomson Reuters Accelus (http://accelus.thomsonreuters.com/). Compliance Complete (http://accelus.thomsonreuters.com/solutions/regulatory-intelligence/compliance-complete/) provides a single source for regulatory news, analysis, rules and developments, with global coverage of more than 230 regulators and exchanges. Follow Accelus compliance news on Twitter at: http://twitter.com/GRC_Accelus)

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