On 11 January 2012, the Commodity Futures Trading Commission (“CFTC”) approved final regulations establishing a registration process for swap dealers and major swap participants. Registration will not become mandatory until such time as the rule defining key terms such as “swap”, “swap dealer” and “major swap participant” becomes effective. The final regulation includes a provisional registration process whereby prospective swap dealers and major swap participants can become provisionally registered subject to rolling compliance with new regulations under Section 4s of the Commodity Exchange Act (“CEA”) as they become effective. The CFTC is delegating registration functions to the National Futures Association. Under the registration requirements, swap dealers and major swap participants must become and remain members of a registered futures association. Push-out affiliates (a non-insured depositary institution affiliate that is a swap dealer or major swap participant) will also be subject to the foregoing requirements.
The final regulations prohibit any swap dealer or major swap participant from permitting any person associated with such entity who is subject to a statutory disqualification to effect or be involved in effecting swaps on its behalf if the swap dealer or major swap participant knows, or in the exercise of reasonable care should know, of the statutory disqualification. The final regulations provide that a “statutory disqualification” for purposes of this prohibition refers to a statutory disqualification under section 8a(2) or 8a(3) of the CEA. Further, a “person associated with a swap dealer or major swap participant” for purposes of this prohibition means an associated person, defined by the final regulations to mean a natural person with respect to such swap dealer or major swap participant. The CFTC decided to limit this particular final rulemaking to the process of registration and determined that issues relating to the extraterritorial application of the swap dealer and major swap participant registration requirements were beyond the scope of the rulemaking. For further information with respect to Dodd-Frank Title VII rule compliance schedules, please click here.