Confidential file

CFTC clarifies foreign regulators’ indemnification and confidentiality obligations

The Commodity Futures Trading Commission has issued final interpretative guidance to, under certain circumstances, exempt foreign regulators from the indemnification and confidentiality provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act. 

This exemption applies generally to data that is reported pursuant to foreign law and if the swap data repository (SDR) is registered, recognised, or otherwise authorised by the country’s law and regulation.

The Commission voted three to two via seriatim to issue the guidance, which will become effective upon publication in the Federal Register.

Specifically, the Commission’s guidance states that a registered SDR would not be subject to the confidentiality and indemnification provisions of the Commodity Exchange Act (CEA) section 21(d) if the SDR is registered, recognised or otherwise authorised in the foreign jurisdiction, and the data has been reported to such SDR pursuant to the foreign jurisdiction’s regulatory regime.

Further, the Commission concludes that the confidentiality and indemnification provisions should not operate to inhibit or prevent foreign regulatory authorities from accessing data in which they have an independent and sufficient regulatory interest – even if that data also has been reported pursuant to the CEA and Commission regulations. The Commission concludes that it is appropriate not to apply the requirements of CEA section 21(d) in these circumstances, in light of, among other things:

 • The importance of such data to the foreign jurisdiction’s regulations;
 • Foreign regulators’ interest in unfettered access to such data; and
 • The traditions of mutual trust and cooperation among international regulators.

On 1 May 2012, the Commission issued a proposed interpretative guidance to address issues raised by members of the public and foreign regulatory authorities with respect to the scope and application of the confidentiality and indemnification provisions of section 21(d). Under the proposed statement, the Commission clarified that the confidentiality and indemnification provisions of CEA section 21(d) should not operate to inhibit or prevent foreign regulatory authorities from accessing data in which they have an independent and sufficient regulatory interest.

CEA section 21(c)(7) requires that SDRs make swap data available to certain domestic and foreign regulators under specified circumstances. Separately, section 21(d) mandates that before an SDR may share the requested data or information, such regulators must agree in writing to abide by confidentiality requirements established in the CEA and to indemnify the SDR and the Commission for any expenses arising from litigation relating to the information provided by the SDR.

Section 752 of the Dodd-Frank Act seeks to “promote effective and consistent global regulation of swaps” and provides that the CFTC and foreign regulatory authorities “may agree to such information-sharing arrangements as may be deemed to be necessary or appropriate in the public interest…” In light of this statutory directive, and mindful of concerns raised by foreign regulatory authorities with respect to the indemnification provisions of CEA section 21(d), the Commission has continued to strive to provide sufficient access to SDR data to appropriate domestic and foreign regulatory authorities.

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