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Joint Audit Committee Revises Earlier Regulatory Alerts to Conform to CFTC Letter No. 20-28
Friday, September 25, 2020

In response to CFTC Letter No. 20-28, the Joint Audit Committee (JAC) has issued Regulatory Alert #20-02 and Regulatory Alert #20-03. As reported here, CFTC Letter No. 20-28 provided supplemental guidance and no-action relief with respect to CFTC Regulation 1.56 (prohibition of guarantees against loss) compliance and further no-action relief with respect to the treatment of separate accounts by futures commission merchants (FCMs), initially set out in CFTC Letter No. 19-17. Specifically, with regard to compliance with the requirements of CFTC Regulation 1.56(b), Letter No. 20-28 gives FCMs until March 31, 2021 to remove or otherwise negate any limited recourse or similar provisions that may be contained in customer agreements. With regard to compliance with CFTC Rule 39.13(g)(8)(iii), the staff extended the time-limited no-action position from June 30, 2021 to December 31, 2021.

Regulatory Alert #20-02 and Regulatory Alert #20-03 revise earlier Regulatory Alerts that the JAC had issued following publication of CFTC Letter No. 19-17 for the sole purpose of updating the no-action dates set out in Letter No. 20-28. Specifically, (1) Regulatory Alert #20-02 amends Regulatory Alert #19-04 and Regulatory Alert #19-06 to include the relevant time frames set out in CFTC Letter 20-28; and (2) Regulatory Alert #20-03 amends JAC Regulatory Alert #19-03 to give FCMs until March 31, 2021 to take corrective action to identify and rectify any customer and noncustomer agreements which are not in compliance with CFTC Regulation 1.56(b). The JAC emphasizes that all other requirements of the earlier Regulatory Alerts remain in effect.

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