On April 29, 2015, the SEC proposed rules that address the application of its security-based swap regulations to transactions involving non-US parties that are arranged or executed using US personnel. The proposed rules mark a further evolution in the SEC’s position on the extraterritorial application of its security-based swap regulations. The proposed rules thus weigh in on a controversial issue on the scope of US regulation generally—the extent to which US rules apply to transactions that would otherwise be outside of US jurisdiction, but which are effected using US personnel. The SEC’s proposal follows, and is similar in certain respects, to a widely criticized Advisory published in November 2013 by the US Commodity Futures Trading Commission staff, which took the position that so-called transaction-level requirements should generally apply to a non-US swap dealer effecting a transaction through US personnel or a US agent, even where its counterparty was also a non-US person. The CFTC subsequently sought public comment on the issues raised by the Advisory, and has delayed implementation of the Advisory, by issuing a no-action letter, until at least September 30, 2015. The SEC’s approach, if adopted, would generally take a similar approach with respect to reporting and business conduct rules, but would not impose mandatory clearing or exchange trading requirements on such transactions. The SEC’s proposed rules would modify and extend certain aspects of its previously adopted rules addressing the cross-border application of the security-based swap dealer registration requirements, as well as recently adopted Regulation SBSR, in the context of transactions “arranged, negotiated or executed” by US personnel. The proposed rules also modify and re-propose rules regarding the application of external business conduct rules in that context. The comment period for the proposed rules will be 60 days after publication in the Federal Register.
The SEC proposed rule is available at: http://www.sec.gov/rules/proposed/2015/34-74834.pdf.
The CFTC Staff Advisory No. 13-69 (Nov. 14, 2013) is available at: http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/13-69.pdf.
The CFTC No-Action Letter No. 14-140 (Nov. 14, 2014) is available at: http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/14-140.pdf.