Forensic Update

Reflections on information management within the legal and regulatory arena

Can’t you hear the whistle blowing?

Posted by Johnny Lee on February 8, 2011

Dodd-Frank Act creates new record-keeping requirements for Commodities Traders…

On July 21, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act.  This law creates significant financial industry changes as well as an “incentive program” that provides monetary rewards to individuals who report securities violations (so long as those reports lead to the government’s recovery of sanctions exceeding $1 million in criminal and civil proceedings).  The law also establishes record-keeping and reporting requirements for swap dealers and major swap participants, and it requires the Commodities Futures Trading Commission (“CFTC”) to adopt rules that prescribe which records must be maintained by swap dealers and major swap participants.

Obviously, there are immediate and impactful changes to companies put on notice about potential whistleblower reports.  The new “bounties” will arguably increase the number of whistleblower allegations, while the language of the new Act will make the careful steps taken by companies and their legal counsel even more important, as they embark upon independent internal investigations “as quickly and accurately as possible to determine the overall scope of the allegations and level of misconduct committed.”

Companies subject to the Act, would be required under the proposed CFTC rules to maintain full and complete transaction and position information for all swap activities.  Further, these records must be maintained in a “manner that is identifiable and searchable by transaction and by counterparty.”  Likewise, the proposed rules would require the retention of basic business records, including corporate governance minutes, organizational charts, and audit/compliance documentation.  The Act’s data retention requirements even extend to certain financial records (such as information related to cash positions or forward transactions used to hedge), records of complaints against personnel, and marketing materials.  The good news in all of this is that those entities already compliant with existing CFTC records rules would see no changes to at least the retention periods.

For an excellent write-up of the broader impacts of the Dodd-Frank Act, click here.  Check dodd-frank.com for a general overview of the Act and for updates on this Act and other important securities laws.

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One Response to “Can’t you hear the whistle blowing?”

  1. […] This post was mentioned on Twitter by François Senécal, Data Retention. Data Retention said: Dodd-Frank Act creates new record-keeping requirements for … http://ow.ly/1bfaVf […]

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