Regulatory Compliance

The Dodd-Frank requirements behind every trade, handled so your hedge closes clean and stays compliant.

Dodd-Frank turns most hedges into a regulated transaction. We get the eligibility, the LEI, and the protocol documentation right and early, so compliance never delays a closing.

Since Dodd-Frank, hedges fall under a federal regulatory framework administered by the CFTC. For a real estate borrower, that means a hedge isn't just a commercial negotiation with a bank. It's a regulated transaction with paperwork that has to be right before anyone can trade. None of it is difficult, but all of it is sequential, so a single gap can stall a closing everyone assumed was done. Pensford gets the pieces in place early, so the regulatory layer never delays a close.

Both swap parties must obtain an LEI (also called a GMEI) so regulators can track exposure between counterparties across products. There's an initial fee and an annual renewal. We make sure it's in place before it's needed.

Each bank has its own set of Dodd-Frank onboarding documents requiring the borrower to make certain representations. We complete the protocol documentation and questionnaire so you don't have another stack of paperwork to work through.

Banks are required to provide daily valuations of your derivative. Note, this daily valuation is not the level at which they'll terminate the trade, and it will carry a disclosure saying as much. We manage those required disclosures as well as offer independent third-party valuations for any hedge we place.

Because of the arm's-length distance banks must keep, they're prohibited from assisting with most of the compliance process. Pensford helps guide clients through each phase of complying with the regulations and assists with ongoing monitoring.

Done right, compliance is invisible: you trade on schedule, the file is clean for any future audit, and the regulatory framework never becomes the reason a deal slips.