SEC Proposed Rules on Cross-Border Security-Based Swap Activities

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Introduction -

On May 1, 2013, the Securities and Exchange Commission (“SEC”) adopted and made public for comment proposed rules and interpretive guidance (“Proposed Rules”) to address the application of the provisions of the Securities Exchange Act of 1934, as amended (“Exchange Act”), that were added by Subtitle B of Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) to govern crossborder security-based swap (“SBS”) activities. Since Title VII of the Dodd-Frank Act became effective in July 2011, the SEC has received numerous inquiries and comments from foreign regulators and participants involved in the global SBS market who have voiced concerns over how Title VII (and the SEC’s implementing regulations thereunder) will apply to the cross-border activities of US and non-US market participants. The SEC’s Proposed Rules aim to address these important concerns, and are meant to inform parties to SBStransactions which regulatory requirements apply when their transactions occur in part within and in part outside the United States.

Among other things, the Proposed Rules set forth how the SEC will apply the requirements of Title VII and the SEC regulations thereunder to SBSs in the context of cross-border transactions; provide the SEC’s definition of “US person” and introduce the territorial concept of “transaction conducted within the United States”; review the registration requirements of security-based swap dealers (“SBSDs”) and major security-based swap participants (“MSBSPs”); and describe the SEC’s substituted compliance framework and procedures.

The comment period for the Proposed Rules is open until August 21, 2013.

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