Court Dismisses Challenge to CFTC Cross-Border Guidance: District Court Dismisses Broad-Based Challenge to CFTC Cross-Border Interpretative Guidance but Remands Several Title VII Dodd-Frank Swaps Rules for Further Cost-Benefit Analysis; Remanded Rules Not Vacated and Will Remain in Force During Remand

Sullivan & Cromwell LLP - September 18, 2014

On September 16, 2014, the United States District Court for the District of Columbia dismissed a broad-based challenge to the interpretive guidance and policy statement issued by the Commodity Futures Trading Commission (“CFTC”) in July 2013 relating to the extraterritorial application of the CFTC’s swaps rules adopted pursuant to Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank” or “Dodd-Frank Act”).  The guidance specifically addressed the circumstances under which certain Dodd-Frank requirements, such as the CFTC’s swap reporting rules, mandatory clearing requirement, trade execution requirement, and swap dealer registration and business conduct requirements, would apply in connection with transactions and trading activity involving one or more non-U.S. counterparties.  Although the Court dismissed the broad challenge to the CFTC’s cross-border guidance, the decision separately concluded that several of the CFTC’s Dodd-Frank rulemakings failed to address the costs and benefits of the extraterritorial application of those rules, and the Court remanded those rules to the CFTC for further cost-benefit consideration.  However, the Court elected not to vacate the rules for the duration of the remand, concluding that vacatur would be unnecessarily disruptive to the “CFTC’s mission and the purposes of the Dodd-Frank Act.”