Countdown to EMIR: ISDA/FOA EMIR Reporting Delegation Agreement published

Some points to note on the ISDA/FOA EMIR Reporting Delegation Agreement published on 13 January 2014.

On 13 January 2014 the International Swaps and Derivatives Association (ISDA) published the joint ISDA/FOA EMIR Reporting Delegation Agreement, produced jointly with the Futures and Options Association (FOA). The agreement provides a template designed to enable those counterparties to derivative trades who are subject to the trade reporting obligation under Article 9 of the European Market Infrastructure Regulation (EMIR) to take advantage of the possibility, contemplated by Article 9(4) of EMIR, for a third party to report details of trades to an approved trade repository on their behalf.

Click here for more information on the EMIR trade reporting requirement generally, and here for more information on the specific timing issues for alternative investment funds, such as hedge funds.

The Reporting Delegation Agreement sets out the terms on which a person (referred to as the Reporting Delegate) agrees to “help” a counterparty to a derivative trade (referred to as the Client) to satisfy its obligation to report details of the trade to a trade repository under Article 9.  There are two main points to note in this context.

Firstly, although EMIR contemplates the possibility of reports being submitted to a trade repository on the Client’s behalf, it is important to remember that the Client remains ultimately responsible for compliance with the Article 9 requirements and more to the point, liable to disciplinary action for any non-compliance resulting from the acts or omissions of the Reporting Delegate.  Secondly, clients should review the template Reporting Delegation Agreement carefully before deciding whether to use it and consider what changes need to be made to it to ensure it is suitable for their purposes.  A particular issue to bear in mind in this context is that the Reporting Delegate is not actually obliged by the terms of the Agreement to deliver reports to a trade repository in all cases, being obliged instead to notify the Client as soon as reasonably practicable if it “does not or will not” submit a report by the relevant deadline.

As a result, the Reporting Delegation Agreement should not be seen as providing a way to transfer responsibility (and liability) for compliance with the Article 9 requirements to a third party.  Moreover, anyone contemplating using it should always have contingency plans to deal with the potential need to submit Article 9 reports at very short notice and choose the relevant Reporting Delegate carefully to minimise the possibility of problems at a later stage.

Nevertheless the Reporting Delegation Agreement provides a potentially useful means by which the administrative burden associated with the Article 9 requirements can be managed.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.