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Federal Register / Vol. 86, No. 27 / Thursday, February 11, 2021 / Rules and Regulations
the Commissions regulations.187
Various SEF CCOs also have provided feedback that certain ACR content requires substantial time to prepare and includes some information that does not change frequently.188 SEFs requested that the Commission simplify those requirements and provide additional time to file the reports. To this end, the Commission notes many SEFs have not provided sufficient assessments whether their respective policies and procedures e.g., rulebooks, compliance manuals, conflict of interest policies, codes of ethics, governance documentation, and third-party service agreements comply with the Act and Commission regulations.
1. Proposed Rules
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Based upon its experience in reviewing ACRs, the Commission proposed certain amendments to eliminate duplicative or unnecessary information requirements and streamline existing requirements, thereby reducing unnecessary regulatory burdens and compliance costs associated with certain aspects of ACRs.
The Commission also proposed certain amendments to enhance the usefulness of ACRs by enabling the Commission to better assess the effectiveness of a SEFs compliance and self-regulatory programs.
Under the proposed approach, a SEF
would no longer need to include in its ACR either a review of all the Commission regulations applicable to a SEF or an identification of the written policies and procedures designed to ensure compliance with the Act and Commission regulations.189 Instead, under proposed 1501d1, a SEF
would be required to include in the ACR a description and self-assessment of the effectiveness of the SEFs written policies and procedures to reasonably ensure compliance with the Act and applicable Commission regulations. The Commission stated its belief that this approach is more closely aligned with the corresponding provisions of Core Principle 15 and would still allow the Commission to properly assess the SEFs compliance and self-regulatory 187 Among other information required to be submitted to the Commission pursuant to part 40, a SEF is required to provide the Commission with amendments to its rulebook and compliance manual.
188 See CFTC Staff Letter No. 1761 citing testimonials from SEFs that the preparation of an ACR requires an extensive information-gathering process, including review and documentation of information gathered on an entity-wide basis.
189 The Commission proposed to eliminate these requirements in the introductory language of existing 1501e2 and 1501e2i.

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programs.190 Similarly, the Commission also proposed to eliminate a required discussion of the SEFs compliance staffing and structure; a catalogue of investigations and disciplinary actions taken over the last year; and a review of disciplinary committee and panel performance.191 A SEF would continue to be required to describe in its ACR the SEFs financial, managerial, and operational resources set aside for compliance.192 By refining the scope of information a SEF would be required to include in its ACR, the Commission intended to allow SEFs to devote their resources to providing more detailed and ultimately better-quality information that will better facilitate assessments of compliance.
To enhance the Commissions ability to assess a SEFs written policies and procedures regarding compliance matters, the Commission also proposed to require a SEF to discuss only material noncompliance matters and explain the corresponding actions taken to resolve such matters.193 The Commission stated requiring SEFs to focus on describing material noncompliance matters, rather than describing all compliance matters in similar depth, would streamline this requirement and provide more useful information to the Commission.194
Further, the Commission proposed to eliminate the enumerated mechanisms for identifying noncompliance issues, conforming to the ability of a CCO to establish procedures to identify 190 83 FR 62035. As proposed, a SEF would continue to be required to describe the SEFs written policies and procedures, consistent with Core Principle 15. In addition to the required description, the Commission proposed to consolidate and amend existing 37.1501e2ii, which requires a SEF to provide in the ACR a selfassessment as to the effectiveness of its policies and procedures, with existing 37.1501e1, and renumber the consolidated requirement to 37.1501d1. Further, the Commission proposed to consolidate and amend existing 37.1501e2iii, which requires an ACR to discuss areas for improvement and recommend potential or prospective changes or improvements to a SEFs compliance program and resources, with existing 37.1501e3 and renumber the consolidated requirement to 37.1501d2. The Commission expects the CCO will provide more nuanced and in-depth discussions through these consolidated provisions, rather than merely providing generalized responses.
191 The Commission proposed to eliminate these requirements under existing 37.1501e4.
192 The Commission proposed to renumber the remaining requirements under existing 37.1501e4 to 37.1501d3 and adopt technical amendments.
193 The Commission proposed to renumber this requirement under existing 37.1501e5 to 37.1501d4 and adopt the amendments as described above and additional, technical changes.
194 83 FR 62035.

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noncompliance issues through any means, as described above.195
Consistent with these proposed amendments, the Commission also proposed to limit a SEF CCOs certification of an ACRs accuracy and completeness to all material respects of the report.196 The Commission recognized CCOs have been hesitant to certify that an entire ACR is accurate and complete under the penalty of the law, without regard to whether a potential inaccuracy or omission would be a material error or not. The Commission believed the proposed change would appropriately address SEF CCOs concerns regarding potential liability while ensuring the material accuracy of an ACR submitted to the Commission.197
2. Summary of Comments Refinitiv and WMBAA support the proposed amendments to the preparation of the ACR.198 Refinitiv believes the ACR is unduly burdensome to prepare in its current form in comparison to the regulatory benefits of much of the information required to be provided; and the proposed amendments would more closely harmonize a SEFs ACR requirements with ACR requirements for a swap dealers or futures commission merchants. Refinitiv supports the proposal to eliminate the requirement to include a chart identifying a specific policy or procedure reasonably designed to ensure compliance with each individual regulation and paragraph of a regulation. In Refinitivs view, the proposed requirements regarding CCO
reports would ensure a proper compliance review on an annual basis without the unnecessary costs incurred in connection with producing such a chart.
3. Final Rules The Commission is adopting the amended requirements for preparation of an ACR as proposed. The streamlined content requirements will allow SEF
CCOs to focus on providing complete and accurate information on the compliance matters that are most critical to the Commissions oversight of SEFs, and allow the Commission to conduct a more efficient and effective 195 See Section IV.D., supra. The Commission proposed to eliminate these enumerated mechanisms from the ACR requirements under existing paragraph e5.
196 The Commission proposed to renumber existing 37.1501e6 to 37.1501d5 and amend the requirement as described.
197 83 FR 62035.
198 2019 WMBAA Letter at 2526; Refinitiv Letter at 14.

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