Goldman Sachs 2015 Annual Report Download - page 32

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
The CFTC and SEC have issued guidance and rules relating
to swap activities. The CFTC has provided guidance and
timing on the cross-border regulation of swaps and
announced that it had reached an understanding with the
European Commission regarding the cross-border
regulation of derivatives and the common goals underlying
their respective regulations. The CFTC also approved
certain comparability determinations that would permit
substituted compliance with non-U.S. regulatory regimes
for certain swap regulations related to certain business
conduct requirements, including chief compliance officer
duties, conflict of interest rules, monitoring of position
limits, record-keeping and risk management. The SEC
issued rules and guidance on cross-border security-based
swap activities and the CFTC issued proposed rules that
would determine the circumstances under which registered
swap dealers would be subject to the CFTC’s rules
regarding margin in connection with uncleared swaps in
cross-border transactions. In particular, under the
proposal, certain non-U.S. swap dealers would generally be
required to comply with the CFTC’s rules but, with respect
to the requirement to post margin, these non-U.S. swap
dealers would be permitted to comply with comparable
margin requirements in a foreign jurisdiction, subject to the
CFTC’s approval of the particular jurisdiction. Substituted
compliance would also be available with respect to the
collection of margin in certain circumstances. The CFTC’s
rules will only be applicable to those swap dealers that are
not subject to the margin requirements of a prudential
regulator.
The application of new derivatives rules across different
national and regulatory jurisdictions has not yet been fully
established and specific determinations of the extent to
which regulators in each of the relevant jurisdictions will
defer to regulations in other jurisdictions have not yet been
completed. The full impact of the various U.S. and non-U.S.
regulatory developments in this area will not be known
with certainty until all the rules are finalized and
implemented and market practices and structures develop
under the final rules.
J. Aron & Company is authorized by the U.S. Federal
Energy Regulatory Commission (FERC) to sell wholesale
physical power at market-based rates. As a FERC-
authorized power marketer, J. Aron & Company is subject
to regulation under the U.S. Federal Power Act and FERC
regulations and to the oversight of FERC. As a result of our
investing activities, Group Inc. is also an “exempt holding
company” under the U.S. Public Utility Holding Company
Act of 2005 and applicable FERC rules.
In addition, as a result of our power-related and
commodities activities, we are subject to energy,
environmental and other governmental laws and
regulations, as described under “Risk Factors — Our
commodities activities, particularly our physical
commodities activities, subject us to extensive regulation
and involve certain potential risks, including
environmental, reputational and other risks that may
expose us to significant liabilities and costs” in Part I,
Item 1A of the 2015 Form 10-K.
Investment Management Regulation
Our investment management business is subject to
significant regulation in numerous jurisdictions around the
world relating to, among other things, the safeguarding of
client assets, offerings of funds, marketing activities,
transactions among affiliates and our management of client
funds.
Certain of our subsidiaries are registered with, and subject
to oversight by, the SEC as investment advisers. The SEC
recently adopted amendments to the rules that govern SEC-
registered money market mutual funds. The new rules
require institutional prime money market funds to value
their portfolio securities using market-based factors and to
sell and redeem their shares based on a floating net asset
value. In addition, the rules allow, in certain circumstances,
for the board of directors of money market mutual funds to
impose liquidity fees and redemption gates and also require
additional disclosure, reporting and stress testing. Certain
reporting requirements became effective during 2015, and
the firm’s money market mutual funds will be required to
comply with the amendments relating to floating net asset
value, fees and redemption gates and stress testing in 2016.
In September 2015, the SEC also proposed rules that would
require registered funds to adopt and implement liquidity
risk management programs, including establishing a
minimum percentage of net assets that could be invested
only in assets offering three-day liquidity and classifying
and reviewing the liquidity of fund portfolio assets; permit
funds to employ “swing pricing,” under which the net asset
value of a fund’s shares may be adjusted in order to pass the
cost of trading in such shares to purchasing or redeeming
shareholders; and require related disclosures.
20 Goldman Sachs 2015 Form 10-K