swap dealer registration and compliance working session · program overview youtline of program: ya...

MORRISON & FOERSTER LLP

Swap Dealer Registration and Compliance Working Session

Tuesday, April 17, 2012

Speakers:

David Kaufman, Morrison & Foerster LLP Deborah Prutzman, The Regulatory Fundamentals Group LLC Sherri Venokur, The Regulatory Fundamentals Group LLC

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Swap Dealer Registration and Compliance Working Session

April 17, 2012Presented By

Deborah PrutzmanSherri VenokurDavid Kaufman

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Program OverviewOutline of Program:

A brief status update regarding rulemaking under Title VII of the Dodd-Frank Act

Review of major issues to be considered by a potential swap dealer registrant

Review of the provisional registration process for a swap dealer

Review of major compliance issues facing a swap dealer registrant

This program is not intended to be a general overview or survey of Title VII of the Dodd-Frank Act

Also, our focus will be only on swap dealer registration, not security-based swap dealer registration, for which a final SEC rule has not yet been adopted

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Dodd-Frank Title VII StatusTo date,

The CFTC has finalized many rules covering such areas as: Internal and External Business Conduct Standards, Reporting and Recordkeeping, Collateral Segregation for Cleared Swaps, Customer Clearing Documentation and Timing Requirements, Swap Dealer/MSP Registration, Position Limits and Large Trader Reporting, DCO Core Principles, SDR Registration and Core Principles and Mandatory Swap Clearing Review ProcessThe SEC has finalized fewer rules, but has concurrently been addressing other areas under the Dodd-Frank Act

However, both agencies have yet to finalize rules addressing certain critical areas under Title VII (though some of these have been proposed), including key definitions (such as swap, swap dealer and security-based swap dealer), extraterritoriality, capital and margin, SEFs, block definitions and “available to trade” standards

The CFTC has an April 18th meeting scheduled to consider final rules on key entity definitions

It appears that the CFTC is falling behind the non-binding, tentative rulemaking timeline it established for itself at the end of last year

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Dodd-Frank Title VII StatusEffective dates for many final rules have occurred and others are approaching and, more importantly, compliance dates for many final rules are approaching

The CFTC’s rules have a complex and somewhat confusing patchwork of compliance datesCertain rules (such as those relating to recordkeeping and reporting) have a phase in schedule based on asset class and entity typeOthers have compliance dates that are tied to the effective date of the swap dealer registration regimeStill others have fixed, but differing, dates

Some market participants are expressing concerns that a further delay or extension of compliance dates will be required

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Major Pre-registration IssuesBefore starting the registration process, a potential swap dealer must evaluate a number of challenging issues, many of which are plagued with uncertainties, including the following:

Lack of final definitions: Absence of a final entity definition of swap dealer, as well as a product definition of swap, present challenges for any entity that is not certain whether it is (or is not) a swap dealerLack of guidance on extraterritoriality: Uncertainties regarding booking centers, regulatory exposure and which entities may have to be registeredFuture application of the Lincoln Provision and the Volcker RuleLimited designation: Will limited swap dealer designation be permitted and if so to what extent?Dual swap dealer/security-based swap dealer registrationDual registration as, or affiliation with, FCMs and/or broker-dealers, for which capital requirements are a major considerationCoordination of or conflict between EMIR/EU regime and Dodd-Frank regulationsNetting and credit exposure: Potential effects of restructuringsCapital and liquidity burdens: Potential effects of restructuringsUncertainties regarding NFA registration process

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Swap Dealer Registration ProcessSwap dealer registration process has been delegated by the CFTC to the National Futures Association (NFA) for administration

A swap dealer must apply to be registered by the latest effective date of the Swap Definitional Regulations

The Swap Definitional Regulations are those that define “swap dealer”, “major swap participant” and “swap”So, outside date for an existing swap dealer to submit an application will depend on the effective date fixed in these definitional regulations

However, a swap dealer can submit its application, on a provisional basis, anytime prior to this outside date

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Swap Dealer Registration ProcessWhenever a swap dealer submits its application, it must be accompanied by documentation demonstrating compliance with whichever of the 4s Implementing Regulations are then in effect for swap dealersThe “4s Implementing Regulations” are the CFTC’s regulations covering the following areas under Section 4s of the Commodity Exchange Act (CEA):

Capital and Margin (Section 4s(e)) [Rules proposed but not final]Reporting and Recordkeeping (Section 4s(f)) [Rules are final]Daily Trade Reporting (Section 4s(g)) [Rules are final]Business Conduct Standards (Section 4s(h)) [Rules are final]Documentation Standards (Section 4s(i)) [Rules proposed but not final]Duties (Section 4s(j)) [Rules are final]CCO Designation (Section 4s(k)) [Rules are final]Segregation Requirements for Uncleared Swaps (Section 4s(l)) [Rules proposed but not final]

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Swap Dealer Registration ProcessFor a swap dealer to demonstrate “compliance” with any 4s Implementing Regulation, it is required to demonstrate that it has the “ability to comply ”with the relevant regulation by the compliance date for that regulation

For example, the rules governing external business conduct standards have an April 17, 2012 effective date and a compliance date that is the later of 180 days after that rule’s effective date or the date on which swap dealer registration is required. Assuming (as is likely) that the “180 day” provision will control, compliance for this rule will not be due until October 2012Demonstrating the ability to comply may, in addition to policies and procedures, involve operational and IT infrastructure, training and supervision for both monitoring and enforcement

A swap dealer must also become an NFA memberThe NFA has estimated that the annual membership dues for a swap dealer shall range from $125,000 to $1,000,000This dues structure is intended to permit the NFA to recover its swap dealer oversight costs and support full staffing to carry out the NFA’s new regulatory responsibilities

Remainder of this program will explore the provisional registration process that a swap dealer might be commencing now or in the near future

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Provisional RegistrationTo be provisionally registered, a swap dealer must file with the NFA:

Form 7-R (for the swap dealer) and Form 8-R (for its Principals)Fingerprint card for each Principal that is a natural personCompliance documentation for each then applicable 4s Implementing Regulation

The most substantial of these items will likely be the compliance documentation for 4s Implementing Regulations

If all these items are filed, the NFA is required to notify the swap dealer that it is provisionally registered

In the CFTC’s original rule proposal, it did not appear that granting provisional registration was in effect guaranteedHowever, in response to various comments, the CFTC clarified in the final rule that this is the case

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Provisional RegistrationOnce a swap dealer is provisionally registered, the following ongoing registration requirements will apply:

As each additional 4s Implementing Regulation becomes effective and applicable to swap dealers, a provisionally registered swap dealer will need to supplement its application to demonstrate compliance with that additional 4s Implementing Regulation

We understand that for each additional 4s Implementing Regulation, the NFA intends to prompt its provisional registrants to remind them to supplement their applications

The NFA will review a provisional registrant’s compliance documentation to determine whether it demonstrates compliance

If the NFA determines any such documentation fails to demonstrate compliance, it will issue a deficiency notice to the provisional registrantRegulations provide, in effect, for a 90-day cure period, with additional flexibility for the NFA to extend the cure period upon an applicant’s request

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Provisional RegistrationProvisional registrants should note the following:

For Form 8-R, it is important to thoroughly disclose the background of Principals. Better to “over disclose” than to have NFA’s background check identify even a minor matter that is undisclosed (e.g., even a matter that has been expunged is expected to be disclosed)

Rule permits outside (non-employee) directors to provide certifications in lieu of fingerprint cards

For associated persons (APs), no formal method for checking an AP’s background is prescribed

Presumably, whatever approach the NFA accepts for clearing APs for FCMs or other types of registrants should suffice for swap dealer AP clearanceNot clear whether the SEC’s CRD clearance will be sufficient for NFA purposes

To the extent “limited designation” is permitted for swap dealers, this determination will be handled by the CFTC not the NFA

NFA registration will initially in all cases be for an entire entity and all swaps activitiesLimited designation will involve a separate CFTC application process, with any CFTC determination being communicated to the NFA which will then recognize any limited designation as granted by the CFTC

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Provisional RegistrationThe form and format of 4s compliance disclosure will not be mandated by the NFA, although it is expected that the NFA will provide a description of what, in substance, should be submitted for each 4s Implementing RegulationFor each 4s Implementing Regulation, a provisional registrant will need to submit relevant policies and procedures, but it is less clear what additional materials will need to be provided

However, the NFA recognizes that the rule requires a demonstration of an applicant’s “ability to comply”Therefore, a registrant cannot assume that mere submission of policies and procedures will suffice

Technically possible that the 90-day deficiency cure period could expire prior to the date by which a swap dealer would be required to comply with a particular rule

Presumably the NFA will take a flexible approach to avoid a result that would appear to penalize parties for filing earlier rather than later

When the NFA confirms that a provisional registrant has demonstrated compliance with all 4s Implementing Regulations and all other applicable registration requirements, the registration will cease to be provisional

Unclear what form this “confirmation” will take

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Compliance IssuesAmong the major compliance issues and challenges facing swap dealer registrants are:

Policies and procedures: developing the required policies and procedures to demonstrate compliance with all 4s Implementing Regulations

Supervision and CCO compliance: demonstrating that a strong supervisory system is in place, with skilled supervisory personnel along with a qualified CCO, is likely to be a critical item assessed by the NFA

Training programs: internal training programs regarding policies and procedures are likely to be assessed by the NFA

IT and related infrastructure: the ability to comply with the required policies and procedures will demand extensive IT and infrastructure development by registrants

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Compliance IssuesPolicies and Procedures: Developing and implementing the newly-required policies and procedures represents a daunting challenge for many potential swap dealer registrantsAmong those required, some of the most significant new policies are the following:

Internal business conduct standardsRecordkeeping and reporting (including legacy swaps, real-time reporting, general recordkeeping and reporting and daily trade records)Conflicts of interestWhistleblower protection (based on a new general requirement under the CEA)Swap dealer duties (including risk management, diligent supervision, position limit monitoring and anti-trust compliance)Business continuity/disaster recovery

External business conduct standardsDocumentation standards (for both cleared swaps and uncleared swaps)

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Compliance IssuesPossible approaches to developing required policies:

Develop new set of standalone policies for swap dealerLeverage off existing policies (e.g., those already in effect for affiliated FCMs, BDs, or banking entities)

In some cases, existing policies may be easily expanded to cover swap dealer and other regulated affiliates (e.g., whistleblower policy)In other cases, using an existing policy in this manner may be difficult (e.g., external business conduct standards policy)

Where feasible, leveraging off an existing policy may prove to be a quicker and more cost efficient approach

However, standalone policies may provide advantages in terms ofDemonstrating compliance to the NFATraining, supervision and general internal communicationAbility of CCO to provide annual certification

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Compliance IssuesTo illustrate the dimensions of this challenge, we will take a closer look at two of the most significant new sets of policies that a swap dealer will be required to develop: Internal Business Conduct Standards and External Business Conduct Standards

Developing each policy requires a close examination of the relevant rulesFor Internal Business Conduct Standards, these include:

Rules 23.200 to 23.206 (Reporting, Recordkeeping and Daily Trade Records)NOTE: These Rules in effect incorporate the Real-Time Public Reporting Requirements under Part 43 and the General Recordkeeping and Reporting Obligations under Part 45)

Rules 23.600 to 23.607 (Swap Dealer Duties, including Conflicts of Interest)Rule 1.71 (Conflicts of Interest involving FCMs and IBs)Rule 3.3 (CCO Duties and Requirements)

For External Business Conduct Standards, these includeRules 23.400 to 402, 23.410, 23.430 to 23.434, 23.440, 23.450 to 23.451 (Standards for Dealing with Counterparties, including Special Entities)Rules 23.506, 23.608 to 23.611 (Swap Documentation for Cleared Swaps)Rules 23.500 to 23.505, at present these are proposed but not final (Swap Documentation for Uncleared Swaps)

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Compliance IssuesThe earliest date by which a swap dealer will be required to comply with the rules for Internal Business Conduct Standards and External Business Conduct Standards is October 2012

However, during the provisional registration process with the NFA, a provisional registrant could be required to demonstrate that it has the ability to comply with these rules at a date earlier than the rule’s compliance date

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Compliance Issues-Internal Business Conduct Standards

Changes In Communications Between Swap Dealers and Third Parties

•May not offer favorable research as an inducement for business (Rule 1.71(c)(4))•May make available “independent third-party research reports” if certain disclosure obligations are met (Rule 1.71(c)(5)(iv)(B)) or certain other conditions are satisfied (Rule 1.71(c)(5)(iv)(C))•Must disclose incentives and conflicts of interest regarding customer decisions and trade execution and/or clearing (Rule 1.71(e))

•Must disclose any financial interest with respect to any product the analyst is following (Rule 1.71(c)(5))•May not omit material facts (Rule 1.71(c)(2))•Must maintain records of public appearances (Rule 1.71(c)(5)(iii))

All Personnel (including RA)Research Analyst

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Communications Involving Research Analysts

Contact between Research Analysts and Clearing or Business Trading units is prohibited

• No supervision• No role in compensation • No threats or retaliation for unfavorable research reports

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Communications Involving Research Reports

Non-research personnel (excluding compliance and legal) may not review a research report or communicate with a research analyst regarding a research report, EXCEPT for the following reasons:

to verify factual accuracyto identify conflictsto comment on style and format of the report

AND ONLY IF communication is made through compliance or legal, and all such communications must be documented

Board of Directors and Board Committees may review and approve research reports

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Relationship Between Clearing and Business Trading Units

No swap dealer may attempt to influence the decision of an affiliated FCM regarding the provision of clearing services to particular customers (Rule 1.71(d); Rule 23.605(d))An “appropriate informational partition” must exist between the trading unit of a swap dealer and the clearing unit of an FCM (Rule 1.71(d)(2); Rule 23.605(d)(2))No employee of a business trading unit may tie the provision of trading services to clearing services (Rule 1.71(d)(2)(i)) Employee of the business trading unit may not supervise or control any employee of the clearing unit or play a role in their compensation (Rule 1.71(d)(2))Swap dealers must disclose to customers any material incentives/conflicts of interest regarding trade execution and/or clearing (Rule 23.605(e))Special exceptions allow assistance with respect to management of defaults (Rule 1.71(d)(2)(i))

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Role of the Chief Compliance Officer

CCO must be appointed by, report to, be compensated by, and be removed only by the Board of Directors or senior officer of the firm (Rule 3.3(a)(1-2))CCO must meet certain qualifications including appropriate background and skills (Rule 3.3(b)) CCO must develop appropriate policies “to ensure compliance with the Act and Commission regulations” (Rule 3.3(a); Rule 3.3(d)(1))Board of Directors or senior officer shall meet with CCO annually and at the election of CCO (Rule 3.3(a)(1))CCO duties include: administering the compliance program, resolving conflicts of interest, and resolving issues identified by internal controls (regardless of whether compliance or other controls, such as audit, identify the issue) (Rule 3.3(d))CCO must prepare and sign an annual report (Rule 3.3(d)(6) and Rule 3.3(e))

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Required Annual Compliance Report

The report must describe the entity’s written policies and procedures, including the code of ethics and conflicts of interest policies (Rule 3.3(e)(1))With respect to each requirement under the CEA and its regulations:

- Identify the policies and procedures that are reasonably designed to ensure compliance with the requirement

- Assess the effectiveness of the policies and procedures- Recommend changes or improvements, including resources devoted to compliance- Describe the financial, managerial, operational and staffing resources set aside for

compliance, including any material deficiencies- Describe any material non-compliance issues and the corresponding actions taken

The Annual Report must be furnished to senior management and the CFTC and must be certified by the CEO or CCO under penalty of law (Rule 3.3(f)(3))The company must preserve any records relevant to the annual report, including work papers generated during the drafting of the report and internal communications that contain conclusions, opinions, analyses, or financial data related to the report (Rule 3.3(g))The annual report shall be furnished electronically to the CFTC not more than 90 days after the end of the fiscal year (Rule 3.3(f)(2))

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Reporting and Recordkeeping for Swap Dealers-Trade and Marketing Data

The following trade and marketing data must be preserved:Complete transaction and position records identifiable by transaction and counterparty (Rule 23.201(a)) Marketing and sales materials, including proof of compliance with (or adoption of policies and procedures reasonably designed to establish compliance with) all applicable laws, regulations and SRO rules (Rule 23.201(b)(4))Records of data reported to a swap data depository (Rule 23.201(c))Records of real time reporting data (Rule 23.201(d))Daily Trading Records (Rule 23.202)

Pre-execution, execution, and post-execution trade information (Rule 23.202(a)(1-3))Ledgers (Rule 23.202(a)(4))Daily trading records for related cash and forward transactions (Rule 23.202(b))

Certain legacy swaps as provided in CFTC regulations

Records must be kept for at least 5 years and must be readily accessible for the first 2 years

Records related to transactions must be kept for at least 5 years from the date the transaction ends (through, e.g., early termination, expiration or assignment)

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Reporting and Recordkeeping for Swap Dealers-Governance Data

The following governance data must be preserved:Compliance policies and procedures (Rule 3.3(g)(1)(i)) Records of all activities related to swap dealer business (Rule 23.201(b)), including

- Board and committee meeting minutes, organizational charts, job descriptions (Rule 23.201(b)(1))

- Internal and external audit, risk management, compliance, and consultant reports (Rule 23.201(b)(1)(v))

- Business and strategic plans for business trading unit (Rule 23.201(b)(1)(vi))Financial records as required under the CEA and CFTC regulations (Rule 23.201(b)(2))Records of all complaints received involving partners, members, employees and agents, including disposition, and proof that swap counterparties have received information on where to direct complaints (Rule 23.201(b)(3))

Records must be kept for at least 5 years and must be readily accessible for the first 2 years

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Duties of Swap Dealers

Establish and maintain a risk management program (Rule 23.600(b)(1))Monitoring of position limits (Rule 23.601)Diligent supervision (Rule 23.602)Business continuity and disaster recovery (Rule 23.603)Conflicts of interest (Rule 23.605)Other requirements (Rule 23.606)

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Required Risk Management Program for Swap Dealers

Risk Management policies and procedures must be approved by the governing body of the swap dealer and furnished to the CFTC (Rule 23.600(b)(3-4))Must establish and maintain a risk management unit (Rule 23.600(b)(5))Risks and risk tolerance limits must be identified and policies and procedures must be developed for handling breaches to risk limits (Rule 23.600(c)(1))Risk exposure reports must be provided to senior management, its governing body, and the CFTC on a quarterly basis (Rule 23.600(c)(2))Business trading units must

Trade only with counterparties for whom trading limits have been set (Rule 23.600(d)(2))Set and enforce trading limits, transaction procedures, discrepancy resolution procedures, and unauthorized trade detection process (Rule 23.600(d)(3-7))

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Required Risk Management Program for Swap Dealers/New Product Policy

Risk management program must include a new product policy (Rule 23.600(c)(3)), which requires:

Consideration of anticipated counterparty type, product characteristics and economic function, and whether the product presents novel legal or regulatory issues (Rule 23.600(c)(3)(i))Identification and analysis of all relevant risks associated with the new product and how those risks will be managed (Rule 23.600(c)(3)(ii))Supervisor to assess and certify whether the new product will materially alter the overall entity’s risk profile (Rule 23.600(c)(3)(iii))Governing body to pre-approve any new product that materially alters the entity-wide risk profile (Rule 23.600(c)(3)(iii))Risk management unit to make any necessary modifications to the risk management program based upon the unit’s review of the new product risk analysis (Rule 23.600(c)(3)(iv))

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Diligent Supervision Requirement

Must establish and maintain a system to supervise all business activities performed by its officers, employees, and agents (Rule 23.602(a)(2))Must designate at least one person with authority to carry out the supervisory responsibilities of the swap dealer for all activities relating to its business as a swap dealer (Rule 23.602(b)(1))Must use reasonable efforts to determine that all supervisors meet the training, experience, competence and other qualification standards set by the CFTC (Rule 23.602(b)(2))

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Compliance Issues-External Business Conduct Standards

Significant Changes to Counterparty Relationships

Responsible areas of a swap dealer:Client Intake Group – confirm eligibility/provide necessary disclosuresSwaps Desk/Marketer – obtain clearance to book the trade, prepare scenario analysis according to Dodd-Frank standards with input from risk control group and counterparty (if requested), prepare pre-trade term sheetDocumentation Team – to the extent not addressed by ISDA protocols, negotiate revised trading agreementsLegal and Compliance – review and prepare standard and “bespoke” disclosure documents, revise trading agreements (e.g., ISDA Master Agreement Schedule and CSA Paragraph 13)Risk Control Group– review of proposed swap for consistency with internal risk tolerance levels, review of scenario analysesOperations – confirm that operations can support the swapTrade / Counterparty Approval Committee – review non-standard swap transactions and all transactions with certain specified counterparties

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New due diligence required by swap dealers:In connection with recommending any trade or trading strategy

A swap dealer must:consider potential risks and rewards to counterpartyhave a reasonable basis to determine that the trade or trading strategy is suitable for counterparty

However, a swap dealer can fulfill its obligation to determine the suitability of a recommendation if it:

determines that the counterparty (or its agent) is capable of independently evaluating risks (which determination may be based on written representations)the counterparty (or its agent) represents it is exercising independent judgment in evaluating recommendationthe swap dealer discloses it is acting only as a counterparty and not assessing suitabilityThe swap dealer complies with additional requirements if counterparty is a Special Entity

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New due diligence required by swap dealers:Before entering into a trade

Must obtain information regarding counterparty’s identity and verify counterparty’s eligibility to enter into the trade (whether counterparty is an eligible contract participant and/or commercial end-user or Special Entity)

If counterparty is not an eligible contract participant, trade must be clearedMust advise counterparty of its rights regarding:

ClearingIts receipt of a scenario analysis for the tradeThe segregation of collateral pledged to secure its obligations under uncleared trades

Must provide risk disclosures to counterparty, including:Material risks and characteristics of the swapAny incentives or conflicts of interest the swap dealer has regarding the trade or the strategyFor uncleared trades, price offered to counterparty versus trade’s mid-market mark

Due diligence requirements may be met through counterparty representations, so long as the swap dealer has no reason to believe that the representations are not accurateEnhanced disclosures and trading restrictions for Special Entities

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Compliance Issues- IT Build Out

External Business Conduct StandardsAutomate the processes reflected in representation and disclosure documentsIntegrate documentation into current recordkeeping processCreate process to notify counterparties of updates and changes to disclosures and periodically refresh counterparty status representationsCreate process to prevent the execution of a trade until control groups certify that all control conditions have been metScenario analysis may require additional IT report, especially for stress testing models

Internal Business Conduct StandardsConsider need to support

Compliance programRisk management programRecordkeeping program, including daily trading records, position limits, real-time reporting and reports to swap data repositories

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Compliance IssuesNew Policy and Procedure Requirements

Avoiding research analyst conflicts of interest (Rule 1.71(b))Disclosure to customers of material incentives/conflicts of interest regarding trade execution and/or clearing (Rule 1.71(e); Rule 23.605(e))Duty to comply with the requirements of the CEA and its regulations (Rule 3.3(a))Swap dealer system of risk management (Rule 23.600(b))Swap dealer use of central counterparties (Rule 23.600(c)(5))Swap dealer business trading units (Rule 23.600(d))Swap dealer position limit monitoring (Rule 23.601(a))Swap dealer conflicts of interest (Rule 23.605(b))Swap dealer capturing and transmitting required data to the CFTC (Rule 23.602(b)(2))Swap dealer prevention of actions that may result in unreasonable restraint of trade (Rule 23.607(b))Anti-manipulation policy (Rule 180)

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Major Takeaways• Regulated institutions face a major cultural shift

• The new regulations intend to shift the balance from the prior OTC model to a more conservative futures-oriented model

• This could require a significant change in the operating culture of many institutions

• Effective communication, both internally and with counterparties, will be critical

• Many internal lines of communication will need to be enhanced (e.g., compliance review, new regulatory developments and new product clearance)

• Other lines of communication are subject to regulatory mandate (e.g., communications to counterparties) or regulatory limitations (e.g., ring fencing of research analysts)

• Do not work in silos/take an integrated approach• Many new policies and procedures cut across multiple business and control units, requiring a

coordinated effort to develop workable policies and procedures• A potential problem, given numerous “work streams” that are underway

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Major Takeaways• Coordinate build out of IT/Infrastructure and development of policies and

procedures• Critical to avoid promulgating policies/procedures that cannot be implemented or that are

inconsistent with what the IT teams have developed• New product development will need to be closely coordinated with IT/infrastructure

development

• Compliance system should support CCO annual certification requirement• Need to develop entity-wide policies, procedures, systems and supervisory structure to enable

CCO to make required annual certificate• Need to be able to support the enhanced role of CCO and risk management unit

• NFA likely to require more than policies and procedures• Need demonstration of “ability to comply”• As a result, NFA review may consider supervisory structure, training, IT and general resource

issues among others• Though provisional, registrant is subjecting itself to a significant substantive compliance

commitment

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Major Takeaways• Consider both near-term and ongoing compliance burdens

• In addition to near-term requirements to achieve full registration, consider what ongoing compliance burdens will be

• Given significant budgetary constraints facing many financial institutions, it is important to give due consideration to ongoing compliance costs and resource and personnel demands

• Assess additional documentation requirements, which include new documentation for cleared swaps and modified OTC documentation for uncleared swaps

• Consider appropriate role of board of directors and senior management in new compliance regime

• How can senior management support the process• How will internal upstream reporting on compliance matters be addressed

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