On Dec. 15, CFTC proposed to codify tangible net worth interpretation.
CFTC published public comment request on proposed rule to amend capital, financial reporting requirements of swap dealers (SDs) and major swap participants (MSPs).
To codify staff interpretation in CFTC staff letter No. 21-15relating to tangible net worth capital approach for calculating capital under 17 CFR 23.101, see #109514.
Also, no-action position in Staff letter 21-18, extended by23-11, on alternate financial reporting rules for SDs subject to prudential regulator capital rules, see #114799.
Aims to amend capital, financial reporting to address implementation requirements.
Proposed amendments would codify named relief with respect to the tangible net worth capital approach and financial reporting requirements for bank SDs, respectively.
Clarify matters including general applicability of reporting schedules, approval process of subordinated debt, reporting times for notification of substantial reduction in capital.
Certain required statements related to any material differences between audited and unaudited financial reports, format of required public disclosures of regulatory capital.
Amend Form 1-FRFCM to reflect changes adopted prior for FCM swap net capital rules.
CFTC Letter 21-15 Codification
Proposed to codify CFTC Letter No. 21-15 by amending 17 CFR 23.100 to revise the definitions of tangible net worth and predominantly engaged in non-financial activities.
To provide tangible net worth capital approach may be utilized by nonbank SDs, MSPs.
Amended 17 CFR 23.105 to provide that SDs may apply the test to determine whether they are predominantly engaged in non-financial activities at the parent or entity level.
Also, whether they are using generally accepted accounting principles (GAAP) as adopted in the United States or International financial reporting standards (IFRS).
Further, modified 17 CFR 23.105(l) to state that an SD’s position and other related exposure reporting must be made at the same periodicity as financial reporting.
For SDs electing the tangible net worth capital approach, such reporting is quarterly.
CFTC Letter 21-18 Codification
Codified 21-18 by amending 17 CFR 23.105(p) to permit non-US domiciled bank SDs file applicable financial reporting within 90 days of end of financial reporting period.
Accept balance sheet, regulatory capital schedules under FFIEC reports (Schedule RC and Schedule RC-R) for US-domiciled bank SDs in lieu of current forms in Appendix C.
Also, accept filing of such schedules at same time as filed with prudential regulators.
For non-U.S. bank SDs, permit the filing of balance sheet, statement of regulatory capital schedules in the format provided to the bank SDs’ home country regulator.
But subject to the requirement that they must be in English and converted to US dollars and be filed no later than 90 days following the reporting period end date.
Additionally, amended Appendix C to eliminate the duplicative forms and retain only Schedule 1, which contains position information and is required of all SDs.
Effectiveness
Comments open 60 days after publication in federal register, closing on Feb. 13, 2024.
Jan. 2024 CFTC Fed Reg Proposal
On Jan. 16, 2024, CFTC published proposal in federal register, comment Feb. 13, 2024
Apr. 2024 CFTC Final Rule
On Apr. 30, 2024, CFTC approved a final rule that amended the capital and financial reporting requirements of swap dealers (SDs) and major swap participants (MSPs).
Issued fact sheet detailing amendments; made changes consistent with position in Staff letters no. 21-152, 21-183 re tangible net worth capital and financial reporting.
Clarified applicability of reporting schedules, process for approval of subordinated debt.
Reporting timeframe required for the notification of a substantial reduction in capital.
Also, certain required statements related to material differences between audited and unaudited financial reports, format of required public disclosures of regulatory capital.
Made changes to Commission’s Form 1-FR-FCM to reflect revisions previously adopted.
Commissioner Kristin Johnson and Commissioner Caroline Pham supported final rule.
Effective date of final rule is 30 days from date of publication in the federal register.
Compliance date is Sep. 30, 2024, reports with as of reporting date of Sep. 30 or later.
Regulators
CFTC
Entity Types
B/D; Exch; FCM; OTC
Reference
Sp, PR 8901-24, Info, FAQ, RF 6351-01-P, 4/30/2024; 89 FR 2554, 1/16/2024; PR 8836-23, RF, Info, FAQ, Form 1-FRFCM, 12/15/2023; RIN 3038-AF33; Citation: *17 CFR* 23.100, 23.101, 23.102, 23.103, 23.105, 23 E Appendix B, 23 E Appendix C;
