WASHINGTON, D.C. — The Commodity Futures Trading Commission’s Market Participants Division and Division of Enforcement today released procedures regarding CFTC-registered non-U.S. swap dealers or major swap participants (“Swap Entities”) relying on substituted compliance. 

The procedures establish how the Divisions will address potential non-compliance with foreign law that has been found by the CFTC to be comparable in outcome to the Commodity Exchange Act or CFTC regulations pursuant to a substituted compliance order. 

Generally, the procedures require CFTC staff to adhere to principles of international comity and deference to the foreign regulator, including that the foreign regulator interprets and applies the home country regulation (not the CFTC), and that MPD and DOE will not pursue an inquiry if the foreign regulator determines that the non-U.S. Swap Entity is in compliance with foreign comparable standards, or the foreign regulator is addressing the non-compliance issue through its supervisory process.

Any inquiry involving substituted compliance will be handled by MPD, unless MPD determines that a supervision or non-compliance issue is material and makes a referral to DOE pursuant to CFTC Staff Letter 25-13.

The procedures were developed following a request, submitted jointly by IIB, ISDA, and SIFMA, for guidance regarding the CFTC’s referral process for substituted compliance.