Cross-Border Security-Based Swaps: SEC Issues Final Rules on Cross-Border Security-Based Swap Activity in the United StatesSullivan & Cromwell LLP - February 17, 2016
On February 10, 2016, the SEC issued a release with final rules, amendments and interpretations on certain cross-border security-based swap activities under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Final Release”). The Final Release, which is yet to be published in the Federal Register, requires a non-U.S. person to include transactions connected with its security-based swap dealing activity that are arranged, negotiated or executed by personnel of the non-U.S. person located in a U.S. branch or office, or by the personnel of the non-U.S. person’s agent located in a U.S. branch or office, toward the non-U.S. person’s determination of its status as a security-based swap dealer under Title VII. The SEC clarifies in the Final Release that “arrange,” “negotiate” and “execute” refer to client-facing sales and trading activities and not to back office, document preparation or other ministerial activities.
The SEC’s approach in the Final Release is consistent with its adoption of a “territorial approach” to security-based swap dealer registration under Title VII (and with the proposing release of April 2015) but does not address a number of matters such as application of the external business conduct, regulatory reporting and public dissemination, and mandatory trade execution and clearing requirements to non-U.S. persons. The SEC has indicated that it will address these matters through subsequent releases.