07.17.2012

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Updates

SEC and CFTC Approve Joint Rules and Interpretations Defining Key Derivative Terms

On Friday, July 6, 2012, the Securities and Exchange Commission (the "SEC"), and on Tuesday, July 10, 2012, the Commodity Futures Trading Commission (the "CFTC"), approved joint rules and interpretations for key definitions of certain derivative products. The rules and interpretations further define the terms “swap” and “security-based swap” and whether a particular instrument is a “swap” regulated by the CFTC or a “security-based swap” regulated by the SEC. The SEC and CFTC joint action also addresses “mixed swaps,” which are regulated by both agencies, and “security-based swap agreements,” which are regulated by the CFTC but over which the SEC has antifraud and other authority.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") established a comprehensive framework for regulating the over-the-counter swaps markets. In particular, the Act provides that the SEC will regulate “security-based swaps,” the CFTC will regulate “swaps,” and the CFTC and the SEC will jointly regulate “mixed swaps.”

Title VII of the Dodd-Frank Act requires that both the SEC and CFTC, in consultation with the Board of Governors of the Federal Reserve System, shall jointly further define the terms “swap,” “security-based swap,” and “security-based swap agreement.” Title VII further provides that the SEC and CFTC shall jointly establish such regulations regarding “mixed swaps” as may be necessary to carry out the purposes of swap and security-based swap regulation under Title VII.

In addition, Title VII requires the SEC and CFTC to jointly adopt rules governing the way in which books and records must be kept for security-based swap agreements.

Read the SEC press release rule

© 2012 Perkins Coie LLP


 

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