On September 15, the SEC issued an order extending temporary exemptions and exceptions from compliance with certain provisions of the Securities Exchange Act of 1934 (Exchange Act) applicable to security-based swaps (SB swaps) that were amended or added by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
Specifically, the order extends the temporary exemption from the requirements of Section 3E(f) of the Exchange Act. Section 3E(f) requires SB swap dealers and major SB swap participants (collectively, SBS Entities) to segregate initial margin amounts delivered by their counterparties in uncleared SB swap transactions if requested to do so by such counterparties. In addition, the order extends the temporary and limited exception from the requirements of Section 15F(b)(6). Section 15F(b)(6) prohibits an SBS Entity from permitting an associated person who is subject to a statutory disqualification to effect or be involved in effecting SB swaps on its behalf if such SBS Entity knew or should have known of the statutory disqualification. The temporary and limited exception allows persons subject to a statutory disqualification who were, as of July 16, 2011, associated with an SBS Entity and who effected or were involved in effecting SB swaps on behalf of such SBS Entity to continue to be associated with such SBS Entity.
The relief under Sections 3E(f) and 15F(b)(6) of the Exchange Act expires upon the compliance date of the SEC’s recently adopted registration rules for SBS entities (Registration Compliance Date). The registration rules for SBS Entities were first reported in the August 7 edition of the Corporate & Financial Weekly Digest.
Finally, the order makes clear that the exemption from Section 29(b) of the Exchange Act, which generally provides that contracts made in violation of any provision of the Exchange Act are void, will continue until the Registration Compliance Date with respect to Sections 3E(f) and 15F(b)(6) of the Exchange Act.
The SEC’s order is available here.