Announcing a Strategic Partnership That Offers Timely SEC Derivatives Rule Compliance

Announcing a Strategic Partnership That Offers Timely SEC Derivatives Rule Compliance
06/14/2022

CINCINNATI—Cincinnati-based Joot and FinTech Law are proud to partner with Cincinnati-based EQ Risk Management Consulting to offer tailored legal, compliance, and operational derivatives risk management advisory services to fund advisers, risk managers, and directors. Joot builds automated compliance tools and offers a range of consulting services to SEC-registered investment advisers. Joot's goal is to help advisers meet SEC regulatory requirements. FinTech Law is a technology-driven law firm focused on innovators and startups in fintech and financial services. EQ is an industry-leading expert in all aspects of derivatives, including theoretical pricing, risk modeling, and management of derivatives risks. This expertise stems from EQ's more than 25 years of experience in the capital markets industry managing derivatives market-making firms and advising hedge funds, mutual funds, institutional and retail investment advisers, derivatives trading desks at regional and international investment banks, as well as derivatives software engineering firms.

This strategic partnership is designed to help firms comply with Rule 18f-4, the SEC’s new regulatory framework for derivatives used by registered funds and business development companies. Joot, FinTech Law, and EQ are offering a comprehensive legal, compliance, and operational advisory engagement that will help boards, fund advisers, and risk managers meet the new Derivatives Rule’s quickly approaching compliance date of August 19, 2022. It’s the one-stop solution for the design, implementation, and monitoring of a robust and compliant risk management program.

Derivatives risk management strategic partnership

Complying with Derivatives Rule Requirements

Among other compliance obligations, the requirement for funds to implement a written derivatives risk management program is a critical component of the new rule. The rule stipulates that the derivatives risk management program must include these basic elements:

  • Risk identification and assessment
  • Risk guidelines
  • Stress testing
  • Backtesting
  • Internal reporting and escalation
  • Program reviews by the risk manager and board

Additionally, the new rule requires the fund’s board of directors to appoint a derivatives risk manager, who’s responsible for administering the derivatives risk management program. The derivatives risk manager must periodically report to the fund’s board, who’s responsible for overseeing the fund’s derivatives risk management program. Funds, boards, and advisers must also meet a range of requirements to help implement and maintain an effective derivatives risk management program and comply with new rule requirements. In future updates, we’ll spell out the various requirements for fund advisers, managers, and directors.

Back to Basics

But before firms can be expected to comply with the new Derivatives Rule, fund advisers, managers, and directors need to understand the rule's legal, compliance, and operational requirements. The teams at Joot, FinTech Law, and EQ have partnered to offer the best comprehensive solution:

  1. To deliver valuable, informative, and clear advice that guides you through the new Derivatives Rule
  2. To advise on improving your derivatives risk management program and maintaining compliance

Stay tuned for a range of materials designed with these goals in mind. In the meantime, please get in touch Joot, FinTech Law or EQ with any questions or feedback. We’d love to hear from you.