On June 15, 2011, the SEC provided guidance as to which of the Title VII requirements of the Dodd-Frank Act will apply to security-based swap transactions as of July 16, the effective date of Title VII. It also granted temporary relief to market participants from compliance with certain of these requirements. Title VII is the portion of the Dodd-Frank Act that establishes a comprehensive framework for regulating over-the-counter derivatives. In particular, it authorizes the SEC to regulate "security-based swaps" while also authorizing the Commodity Futures Trading Commission (CFTC) to regulate other swaps. The delay by the SEC follows similar action by the CFTC, which is drafting rules for other swaps including interest rate and currency swaps, to delay its requirements until as late as December 31, 2011.

The guidance makes clear that substantially all of Title VII's requirements applicable to security-based swaps will not go into effect on July 16. The SEC also granted temporary relief from compliance with most of the new Exchange Act requirements that would otherwise apply on July 16. The delay will give the SEC time to complete the necessary rulemaking and market participants time to put systems and procedures in place.

In addition, to enhance the legal certainty provided to market participants, the SEC's action provides temporary relief from Section 29(b), which generally provides that contracts made in violation of any provision of the Exchange Act shall be void as to the rights of any person who is in violation of the provision. The antifraud and anti-manipulation prohibitions of the federal securities laws will continue to apply to security-based swaps after July 16.

Although the guidance and temporary relief are now in effect, the SEC is seeking input from the public and comments should be received by July 6, 2011.