Our lawyers provide innovative and practical counsel on a wide variety of capital raising and securities law compliance matters. We represent clients ranging from emerging private companies to established public companies. With each, we build long-term relationships, generating efficiencies and helping them realize their business goals.
CFTC and SEC Propose Further Definitions of “Swap Dealer” and “Major Swap Participant”
January 10, 2011
On December 21, 2010, the Commodity Futures Trading Commission (the "CFTC") and the Securities and Exchange Commission (the "SEC" and together with the CFTC, the "Commissions") released proposed joint regulations to clarify the definitions of "swap dealer," "security-based swap dealer," "major swap participant," "major security-based swap participant" and "eligible contract participant" as used in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act"). The proposed regulations contain additional detailed technical definitions of certain key terms used in the definition of "major swap participant," including "substantial position," "major swap categories," "hedging or mitigating commercial risk," "substantial counterparty exposure," "financial entity" and "highly leveraged." The Commissions also specified conditions for exempting insured depository institutions from the "swap dealer" definition in connection with originating loans to customers and other entities that only engage in a de minimis amount of swap dealing. Entities that fall within the definition of "swap dealer" or "major swap participant" will be subject to enhanced requirements under the Dodd-Frank Act, including registration, capital, margin, business conduct, reporting, disclosure and conflicts of interest requirements. This alert provides an overview of the salient details of the proposed regulations.