11.29.2012
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Updates
Federal Agencies Provide Guidance on Regulatory Capital Rulemakings
On Friday, November 9, 2012, the Board of Governors of the Federal Reserve System (the "Fed"), the Federal Deposit Insurance Corporation (the "FDIC"), and the Office of the Comptroller of the Currency (the "OCC") issued a joint press release concerning the three notices of proposed rulemaking issued in June that would revise and replace the current regulatory capital rules. The June proposals suggested a possible effective date of January 1, 2013, for the final revised regulatory capital rules. The press release explains that the agencies do not expect that any of the proposed rules will become effective on January 1, 2013.
CFTC Proposes Customer Protection Rules
On Friday, November 14, 2012, the Commodity Futures Trading Commission ("CFTC") proposed rules pursuant to Section 4d(a)(2) of the Commodity Exchange Act (the "CEA") and Section 4d(f) of the CEA as added by Section 724(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"). The CFTC intends the proposed rules to enhance customer protections, risk management programs, internal monitoring and controls, capital and liquidity standards, customer disclosures, and auditing and examination programs for futures commission merchants ("FCMs"). The proposed rules also address certain related issues concerning the activities of derivatives clearing organizations ("DCOs") and chief compliance officers. The proposed rules seek to provide greater assurances to market participants that customer segregated funds and secured amounts are protected; that customers are provided with appropriate notice of the risks of futures trading and of the FCMs with which they may choose to do business; that FCMs are monitoring and managing risks in a robust manner; that the capital and liquidity of FCMs are strengthened to safeguard their continued operations; and that the auditing and examination programs of the CFTC and the self-regulatory organizations are monitoring the activities of FCMs in a prudent and thorough manner.
CFTC Approves Appeal of Court Decision on Position Limits Rule
On Saturday, November 15, 2012, the CFTC (or "Commission") issued a press release announcing that the agency approved by a 3-2 vote moving forward with an appeal of a Federal District Court’s decision vacating the CFTC's previously approved position limits rule. CFTC Chairman Gary Gensler issued the following statement in the press release:
“As part of the Dodd-Frank Act, Congress directed the Commission to limit promptly speculative positions in physical commodity futures and options contracts and economically equivalent swaps. The rule addresses Congress’ concern [that] no single trader be permitted to obtain too large a share of the market, and that derivatives markets remain fair and competitive. I believe it is critically important that these position limits be established as Congress required. I support the Commission's continued efforts to put in place position limits on speculative positions by appealing the September ruling."
Federal Agencies Provide Stress Test Scenarios
On Saturday, November 15, 2012, the Fed, the FDIC, and the OCC issued separate press releases in connection with the release of the economic scenarios to be used by certain financial institutions with total consolidated assets of more than $10 billion for the upcoming round of stress tests required by the Dodd-Frank Act. The economic scenarios include baseline, adverse, and severely adverse scenarios with variables that reflect economic activity, unemployment, exchange rates, prices, incomes, interest rates, and other salient aspects of the economy and financial markets.
