The SEC Adopts Swap Clearing Agency Rules.

On Thursday, June 28, 2012, the Securities and Exchange Commission (the "SEC") adopted rules that establish procedures for its review of certain clearing agency actions.  The rules are required by Title VIII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), which calls for a regulatory framework for trading in over-the-counter derivatives, including swap agreements.  The rules detail how clearing agencies are to provide information to the SEC about security-based swaps that the clearing agencies plan to accept for clearing.  The information is intended to aid the SEC in determining whether such security-based swaps are required to be cleared.  The rules also require clearing agencies that are designated as "systemically important" to submit advance notice of changes to their rules, procedures, or operations if the changes could materially affect the nature or level of risk at those clearing agencies.

Read the SEC press release rule

The CFTC Proposes Interpretive Guidance on Cross-Boarder Applications of the Dodd-Frank Act.

On Friday, June 29, 2012, the Commodity Futures Trading Commission (the "CFTC") approved for public comment proposed interpretive guidance regarding the cross-border application of the swaps provisions of Title VII of the Dodd-Frank Wall Act and related CFTC's regulations.  The proposed guidance interprets Section 2(i) of the Commodity Exchange Act (the "CEA"), which states that the provisions added to the CEA by Title VII of the Dodd-Frank Act shall not apply to activities outside the United States unless those activities: (1) have a direct and significant connection with activities in, or effect on, commerce of the United States; or (2) contravene such rules or regulations as the CFTC may prescribe or promulgate as are necessary or appropriate to prevent the evasion of any provision of the CEA.

Under the proposed guidance, the CFTC:

• Proposes an interpretation of the term “U.S. person.”
  
  
• Proposes guidance to determine: (1) whether a non-U.S. person’s swap dealing activities are sufficient to require registration as a “swap dealer”; (2) whether a non-U.S. person’s swap positions are sufficient to require registration as a “major swap participant”; and (3) the treatment for registration purposes of foreign branches, agencies, affiliates, and subsidiaries of U.S. swap dealers and of U.S. branches of non-U.S. swap dealers.
  
  
• Proposes to interpret section 2(i) of the CEA as it applies to the requirements under the Dodd-Frank Act and the CFTC’s regulations by classifying requirements as entity-level (apply to either the firm as a whole or the individual transaction or relationship) or transaction-level (apply to each swap).
  
  
• Proposes guidance to permit a non-U.S. swap dealer or non-U.S. major swap participant to comply with comparable and comprehensive foreign regulatory requirements, in order to satisfy applicable statutory and regulatory requirements under the Dodd-Frank Act.
  
  
• Generally describes a process by which a non-U.S. applicant for swap dealer or major swap participant registration may seek the CFTC’s recognition of substituted compliance with a comparable and comprehensive foreign regulatory requirement and the general scope of CFTC review in making the requisite comparability finding.
  
  
• Proposes to interpret the extent to which section 2(i) of the CEA applies to the clearing, trading, and certain reporting requirements under the Dodd-Frank Act with respect to swap transactions between counterparties that are not swap dealers or major swap participants.

Read the CFTC press release

The CFTC Proposes Phased Compliance for Certain Cross-Boarder Swap Regulations.

On Friday, June 29, 2012, the Commodity Futures Trading CFTC (the "CFTC") proposed a phased compliance program regarding certain swaps to non-U.S. swap dealers, non-U.S. major swap participants, U.S. swap dealers, U.S. major swap participants, and foreign branches of U.S. swap dealers and U.S. major swap participants.  The proposed phased compliance would become effective on the compliance date for registration of swap dealers and major swap participants and expire: (i) for non-U.S. swap dealers, non-U.S. major swap participants, foreign branches of U.S. swap dealers, and foreign branches of U.S. major swap participants, 12 months following the publication of the proposal; and (ii) for U.S. swap dealers and U.S. major swap participants, January 1, 2013.

During the relevant phased compliance period and subject to specified conditions in the proposal:

• Non-U.S. swap dealers, non-U.S. major swap participants, U.S. swap dealers and U.S. major swap participants would be afforded additional time to prepare for the application of entity-level requirements.
  
  
• Non-U.S. swap dealers, non-U.S. major swap participants, foreign branches of U.S. swap dealers, and foreign branches of U.S. major swap participants would be able to comply only with the transaction-level regulations as may be required in the home jurisdiction or location of the relevant entity.

Read the CFTC press release

© 2012 Perkins Coie LLP