On March 31, 2015, the CFTC issued no-action relief, subject to specified conditions, to provisionally registered swap dealers from compliance with certain CFTC regulations. The regulations relate to business conduct standards with counterparties and swap trading relationship documentation when entering into swaps with certain special purpose vehicles (“SPVs”) in existence prior to October 10, 2013. Such swaps are referred to as “Legacy SPV Swaps” and the documentation governing the Legacy SPV Swaps are referred to as “Legacy SPV Swap Documentation.” As outlined in the request for the no-action relief, SPVs are entities established for very limited purposes and the permitted activities of SPVs, therefore, are significantly limited through covenants contained in their constitutive documents and transaction agreements. Since they are not operating entities, SPVs rely on third-party service providers to satisfy the SPV’s obligations under the Legacy SPV Swap Documentation and the various structured finance transaction agreements. As the specified CFTC regulations were not contemplated or addressed under the Legacy SPV Swap Documentation and related structured finance transaction agreements, there are consequent legal and practical impediments to third-party service providers taking the steps on behalf of SPVs that may be necessary to comply with the regulatory obligations set forth under the CFTC regulations.
In the no-action relief, the CFTC stated that no enforcement action would be taken against swap dealers for failure to comply with certain CFTC regulations as such regulations may apply to a Legacy SPV Swap.
The CFTC Staff Letter 15-21 is available at: http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/15-21.pdf.