During recent hearings held by the House Agriculture Committee and Subcommittee on Commodity Exchanges, Energy and Credit, the Commodity Futures Trade Commission (CFTC) underscored the importance of removing the indemnification provisions from the Dodd-Frank Act.
At a February 12 committee hearing, CFTC Chairman Timothy Massad highlighted that removal of the indemnification provisions would facilitate the sharing of information and collaboration among regulators to monitor risk. Commissioner Chris Giancarlo and Commissioner Mark Wetjen reinforced this position by highlighting indemnification as a priority issue during the April 14 subcommittee hearing. These hearings were held by the House Agriculture Committee as part of the examination process to reauthorize the CFTC.
Dodd-Frank’s indemnification provisions require that prior to sharing information with U.S. prudential regulators, the Financial Stability Oversight Council, the Department of Justice, foreign financial supervisors (including foreign futures authorities), foreign central banks, or foreign ministries, that:
1. Registered swap data repositories (SDR) receive a written agreement from each entity stating that the entity will abide by confidentiality requirements relating to the information on swap transactions that is provided; and
2. Each entity must agree to indemnify the SDR and the CFTC for expenses arising from litigation relating to the information provided.
The Depository Trust & Clearing Corporation (DTCC) is a long-standing supporter of legislation to remove the indemnification provisions and has worked with Members of Congress and policymakers to advocate for this non-controversial, technical fix. Legislation such as the Swap Data Repository and Clearinghouse Indemnification Correction Act of 2013 (H.R. 742) would remove the provisions from sections 728 and 763 of the Dodd-Frank Act.
In a March 25 statement, Larry Thompson, DTCC Vice Chairman and General Counsel, encouraged the House Agriculture Subcommittee to include this fix as part of its CFTC reauthorization legislation. He cautioned, “These Dodd-Frank requirements run counter to policies and procedures adopted by regulatory bodies globally to safeguard and share data, pose a significant barrier to the ability of regulators globally to effectively utilize the transparency offered by SDRs, and may have the effect of precluding U.S. regulators from seeing data housed at non-U.S. repositories.”
In the statement, Thompson also highlighted that concerns regarding global information sharing have been echoed by regulatory officials and policymakers around the globe. For example, in an August 2013 report, the Committee on Payment and Settlement Systems and the Board of the International Organization of Securities Commissions highlighted that legal obstacles may preclude trade repositories from providing critical market data and encouraged the removal of legal obstacles or restrictions to enable effective and practical access to data.
Ali Wolpert, DTCC Vice President, U.S. Government Relations, explained that a legislative remedy is the only way to remove the indemnifications provisions. “Recent statements made by the CFTC during Congressional hearings serve to reinforce the critical need to move this legislation forward,” she stated. “Removing the indemnification provisions from Dodd-Frank was a priority issue during the 112th and 113th Congress, and we are pleased that this non-controversial measure remains an ongoing focus in the current Congress.”
Highlights from April 14 House Agriculture Subcommittee hearing:
Commissioner Chris Giancarlo:
- “Correcting this unworkable framework in the Dodd-Frank Act is not controversial, and Congress should absolutely provide a legislative fix to this issue, just as the Securities and Exchange Commission (SEC) has endorsed in testimony before Congressional Committees in the 112th Congress.”
Commissioner Mark Wetjen:
- “…it would be useful to the commission’s regulatory mission if Congress were to revise the CEA to remove the indemnification requirement from these information sharing provisions.”