The CFTC Proposes Regulations Concerning Persons Associated With Swap Dealers, Major Swap Participants, and Other CFTC Registrants
On Friday, June 15, 2012, the Commodity Futures Trading Commission (the "CFTC") proposed regulations pursuant to Title VII of the Dodd-Frank Act Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"). The proposed regulations would clarify that each swap dealer ("SD"), major swap participant ("MSP"), and other CFTC registrant with whom an associated person ("AP") is associated is required to supervise the AP and is jointly and severally responsible for the activities of the AP with respect to customers common to it and another SD, MSP or another CFTC registrant.
The CFTC Adopts New Rules and Guidance on Designated Contract Markets
On Tuesday, June 19, 2012, the CFTC adopted new and amended rules, guidance, and acceptable practices to implement certain statutory provisions enacted by Title VII of the Dodd-Frank Act. The final rules, guidance and acceptable practices, which apply to the designation and operation of contract markets, implement the Dodd-Frank Act's new statutory framework that, among other things, amend section 5 of the Commodity Exchange Act (the "CEA") concerning designation and operation of contract markets, and add a new CEA section 2(h)(8) to mandate the listing, trading and execution of certain swaps on designated contract markets.
The OCC Issues Interim Final Lending Limit Rule
On Wednesday, June 20, 2012, the Office of the Comptroller of the Currency (the "OCC") adopted an interim final rule amending its lending limit rule to apply to certain credit exposures arising from derivative transactions and securities financing transactions. The OCC adopted the rule pursuant to Sections 610 and 312 of the Dodd-Frank Act. Section 610 revises the statutory definition of loans and extensions of credit for purposes of the lending limit to include certain credit exposures arising from a derivative transaction, repurchase agreement, reverse repurchase agreement, securities lending transaction, or securities borrowing transaction. Applicable to both federal and state savings associations, pursuant to section 312 of the Dodd-Frank Act (which gives the OCC rulemaking authority for both federal and state savings associations), the rule implements this statutory change which applies to both national banks and savings associations. The rule also consolidates the lending limit rules applicable to national banks and savings associations.
The SEC Adopts Rule Requiring Listings Standards for Compensation Committees and Compensation Advisers
On Wednesday, June 20, 2012, the Securities and Exchange Commission (the "SEC") approved a rule pursuant to Section 952 of the Dodd-Frank Act. The rule directs national securities exchanges to adopt listing standards for public company boards of directors and compensation advisers. Under the rule, listing standards must address:
- The independence of the members on a compensation committee
- The committee's authority to retain compensation advisers
- The committee's consideration of the independence of any compensation advisers and
- The committee's responsibility for the appointment, compensation, and oversight of the work of any compensation adviser.
The CFTC Re-Proposes Swap Contract Aggregation Rule
On Monday, June 25, 2012, the CFTC approved a Notice of Proposed Rulemaking that re-proposes adding certain provisions to Part 43 of the CFTC's Regulations pertaining to block trades in swap contracts. Proposed pursuant to Section 727 of the Dodd-Frank Act, the provisions contained in the proposed rulemaking would:
- Prohibit the aggregation of orders for different trading accounts in order to satisfy the minimum block size or cap size requirements, except for orders aggregated by certain commodity trading advisors, investment advisers and foreign persons, if such qualifying persons have more than $25,000,000 in total assets under management.
- Provide that parties to a block trade must individually qualify as eligible contract participants, except where a designated contract market allows certain commodity trading advisors, investment advisers and foreign persons to transact block trades for customers who are not eligible contract participants, if such qualifying commodity trading advisor, investment adviser or foreign person has more than $25,000,000 in total assets under management.
- Require that persons transacting block trades on behalf of customers must receive prior written instructions or consent from the customer.
The provisions were initially proposed in a December 7, 2010, Notice of Proposed Rulemaking pertaining to Real-Time Public Reporting of Swap Transaction Data (75 FR 76139).
All of our current and future Financial Reform Act updates will be posted at http://perkinscoie.com/thefinancialreformact
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.