SEC Adopts Final Cross-Border Rules Relating to Dealers and Major Participants

June 30, 2014

On June 25, 2014, the U.S. Securities and Exchange Commission (“SEC”) adopted final rules and guidance regarding the application of the “security-based swap dealer” and “major security-based swap participant” definitions to cross-border security-based swap activities under the Securities Exchange Act of 1934, as amended by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Among other matters, the final rules address:

  • Key definitions for purposes of delineating the scope of the security-based swap dealer and major security-based swap participant registration requirements, including definitions of “U.S. person,” “foreign branch,” “transaction conducted through a foreign branch,” and “conduit affiliate”;
  • Which security-based swap dealing transactions a person must count toward the requirement to register as a security-based swap dealer, including the rules for counting transactions by non-U.S. persons with other non-U.S. persons when such transactions are guaranteed by an affiliated U.S. person, as well as rules for aggregating security-based swaps entered into by affiliated entities for purposes of determining security-based swap dealer status;
  • Which security-based swap positions a person must count toward the requirement to register as a major security-based swap participant, including the rules for counting positions that are guaranteed by a U.S. person;
  • Procedures for foreign regulators and market participants to apply for “substituted compliance”; and
  • An anti-fraud rule that addresses the scope of the SEC’s cross-border anti-fraud enforcement authority.

In our memo, we provide a summary of the main provisions of the final rules and provide a table comparing those rules with the final cross-border guidance from the Commodity Futures Trading Commission.

Please contact any of our partners and counsel listed under “Derivatives” in the “Practices” section of the website for further information about the matters discussed above.