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    US Treasury on Exemption from QFC Recordkeeping Requirements

    January 02, 2020

    The US Treasury, after a consultation with FDIC, is issuing a determination regarding a request for an exemption from certain requirements of the rule implementing the qualified financial contracts, or QFCs, recordkeeping requirements related to the Orderly Liquidation Authority under the Dodd-Frank Act. The exemption extends only to Wells Fargo Clearing Services, LLC (WFCS) and Wells Fargo Advisors Financial Network, LLC (FiNet) and to no other entities. The granted exemption becomes effective January 02, 2020.

    On October 31, 2016, a final rule was published under the Dodd-Frank Act, requiring certain financial companies to maintain records with respect to their qualified financial contract positions and the associated counterparties, including legal documentation and collateral. On August 14, 2018, Wells Fargo & Company submitted, to the US Treasury, FDIC, SEC, and CFTC, a request for an exemption from sections 148.3 and 148.4 of the rule, on behalf of its subsidiaries WFCS and FiNet. The requested exemption related to the compliance with  regarding the current and future qualified financial contract portfolio consisting of qualified financial contracts entered into by WFCS or FiNet, with or on behalf of clients (client activity qualified financial contracts) and QFCs entered into by WFCS or FiNet in connection with or in support of client activity qualified financial contracts. Wells Fargo also asked for an exemption from certain guarantees WFCS enters into for the benefit of a futures commission merchant in connection with WFCS' introduction of customer trades to such futures commission merchant.

    The US Treasury has determined to exempt WFCS and FiNet from the recordkeeping requirements of the rule with respect to any qualified financial contract with clients that are their respective customers under the Securities Investor Protection Act, with respect to any transactions or accounts such customers have with WFCS and FiNet, respectively, subject to certain conditions. The US Treasury does not expect that granting this exemption will unduly interfere with the FDIC's ability to avoid or mitigate serious adverse effects on financial stability or economic conditions in the United States. Treasury has determined to exempt any guarantees of such qualified financial contracts by a third party if the guarantor is an affiliate of the customer, is itself a customer of WFCS or FiNet, as applicable, or does not have any other qualified financial contract with WFCS or FiNet, as applicable. In addition, Treasury has determined to exempt WFCS from recordkeeping requirements of the rule with respect to any qualified financial contract entered into by WFCS with a clearing organization for the purpose of facilitating the clearance or settlement of any qualified financial contract subject to the exemption. 


    Related Link: Federal Register Notice 

    Keywords: Americas, US, Banking, Securities, QFC, Recordkeeping, Dodd Frank Act, FDIC, US Treasury

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