Order addresses requests concerning the expansion of the definition of ‘Security’ to encompass security-based swaps - 05 November 2020
The Commission provided exemptions in response to five of six requests and set October 6, 2021 as the expiration date for existing temporary exemptions.
The SEC issued a release on November 2, 2020, granting exemptions from certain sections and rules of the Securities Exchange Act of 1934 and setting the expiration date for existing temporary exemptions (Release No. 34-90308, November 2, 2020).
Accordingly, in the November 2, 2020 order, a "foreign broker or dealer" is exempt from the registration requirement of Section 15(a)(1) of the Exchange Act if its activities in securities other than security-based swaps with or for an eligible contract participant "are conducted either in compliance with Rule 15a-6 under the Exchange Act or without the jurisdiction of the United States."
A registered security-based swap dealer and its associated persons are exempt from the broker registration requirement of Section 15(a)(1) of the Exchange Act until November 1, 2022, in connection with the "arranging, negotiating or executing of a security-based swap transaction with or for a non-U.S. person eligible contract participant on behalf of a non-U.S. person qualified majority-owned affiliate" if books and records relating to the activity are maintained and if Rule 10b-10 under the Exchange Act would apply to such activity, and the dealer provides the required disclosures in accordance with the time and form requirements set forth in Rule 15Fi-2(b) and (c) under the Exchange Act or if, after discovery of any defect in such security-based swap dealer’s good faith effort to comply with the requirements, the customer is promptly notified.
A broker or dealer is exempt from the requirement that they provide disclosures required by Rule 10b-10(a) at or before completion of the transaction in connection with the broker or dealer or associated persons "arranging, negotiating or executing a security-based swap transaction on behalf of a qualified majority-owned affiliate" if the broker or dealer provides written notification containing the disclosures required by Rule 10b-10(a) in connection with any arranging, negotiating or executing a transaction in accordance with the time and form requirements for a trade acknowledgment set forth in Rule 15Fi-2(b) and (c) and, as applicable, Rule 10b-10(c).
Brokers or dealers are exempt from the requirements of Rules 8c-1 and 15c2-1 in connection with securities and money market instruments carried in a security-based swap account of a security-based swap customer if the account does not hold "margin securities" defined in Rule 15c3-3.
A security-based swap with or for an eligible contract participant with standardized terms that make the security-based swap eligible for central clearing falls within the scope of an "eligible OTC derivative instrument" as defined in Rule 3b-13.
OTC registered derivatives dealers also registered with the Commission as security-based swap dealers or major security-based swap participants are exempt from Rule 15a-1(c) in connection with security-based swap transactions with or for an eligible contract participant and Rule 15a-1(d) relating to communications and contacts with an eligible contract participant in a security-based swap transaction.
The temporary exemptions from Section 8 of the Exchange Act and from Rules 8c-1, 15c2-1, 15a-1(c) and 15a-1(d) in connection with the revised definition of "security" as encompassing security-based swaps contained in the 2011 Exchange Act Exemptive Order and extended in the January 2020 Extension Order, are extended until October 6, 2021.
The exemption from Section 29(b) of the Exchange Act contained in the 2011 Compliance Date Order will expire on October 6, 2021.
The release is No. 34-90308.
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