MFA and Industry Group Submit Comments to CFTC on Recordkeeping Rule

On March 20, MFA, IAA, AIMA and SIFMA AMG jointly submitted a letter to the CFTC in response to its proposed rulemaking to amend CFTC Recordkeeping Regulation 1.31 and expressed strong support for the Commission’s efforts to modernize Regulation 1.31. MFA, IAA and AIMA petitioned the CFTC in 2014 to amend CFTC Regulation 1.31, so were especially pleased to see that the CFTC has taken up our initiative. In our letter, the Associations offer several recommendations for further revisions to Regulation 1.31 that would achieve the CFTC’s objectives in a manner that would be less burdensome and less costly for CPOs, CTAs, and other entities subject to CFTC regulation.  The National Futures Association, in its own letter, cited MFA and expressed support for allowing CPOs and CTAs to maintain records at locations other than their main business office and to enter into effective recordkeeping arrangements with third parties without restriction.

Our recommendations include:

  • Recognize that key business and operational differences exist among Commission registrants and ensure that the provisions of CFTC Regulation 1.31 are flexible and principles-based to accommodate new technology as it develops and not to be unduly burdensome for any records entity.
  • Adopt a substituted compliance regime such that CPOs and CTAs that are registered with the SEC as investment advisers under the Investment Advisers Act of 1940 (“Advisers Act”), or are affiliated with a registered investment adviser, should be deemed to be in compliance with CFTC Regulation 1.31 if they comply with the recordkeeping requirements under the Advisers Act.
  • Clarify the definitions of records entity and regulatory records.  In particular, we strongly believe it is neither necessary nor advisable for the Commission to explicitly refer to or encompass the term “metadata” in connection with the concept of regulatory records so that the CFTC Regulation 1.31 is focused on achieving recordkeeping objectives instead of prescribing how those objectives should be achieved.
  • Eliminate the duplicative mandate for specific training requirements and allow records entities to use systems documentation in lieu of requiring additional written policies and procedures.
  • Permit records entities to maintain records at locations other than their main business office and to engage third parties or cloud-based applications, or enter into any other effective recordkeeping arrangements with third parties.