In a regulatory first, the Commodity Futures Trading Commission (CFTC) announced its 2019 examination priorities for registrants of the Division of Market Oversight (DMO), the Division of Swap Dealer and Intermediary Oversight (DSIO), and the Division of Clearing and Risk (DCR). The CFTC chair, Christopher Giancarlo, noted the issuance of these priorities is in line with Project KISS, an initiative that aims to simplify and modernize the CFTC's rules.
DCR: This division is charged with examining derivative clearing organizations (DCOs). It examines systemically important DCOs in consultation with the Federal Reserve Board. Each examination is tailored to the unique characteristics of each DCO and the products it clears. At a high level, the examinations seek to identify areas of weakness in activities that are "critical to a safe and efficient clearing process." Specifically, the division will focus on examining each DCO's financial resources, risk management, system safeguards, and cybersecurity policies, practices and procedures to assess the maturity, capabilities and overall resilience of the DCO.
We recently reported on the 2019 priorities of the Securities and Exchange Commission (SEC) Office of Compliance Inspections and Examinations (OCIE) and noted the SEC is also increasing its scrutiny of emerging areas such as cryptocurrencies. Additionally, both the SEC and the CFTC noted that cybersecurity remains an examination priority. Securities and derivatives registrants should be prepared to demonstrate that their organization is monitoring these areas closely and that they are resilient to potential cyberthreats in order to prevent potential compliance issues.