SEC Approves Rules and Interpretations for Key Terms for Regulating Derivatives

Last week the SEC unanimously approved rules and interpretations for key definitions of certain derivative products.  They further define the terms “swap” and “security-based swap” and whether a particular instrument is a “swap” regulated by the Commodity Futures Trading Commission (CFTC) or a “security-based swap” regulated by the SEC. The SEC action also addresses “mixed swaps,” which are regulated by both agencies, and “security-based swap agreements,” which are regulated by the CFTC but over which the SEC has antifraud and other authority.

The rules and interpretations were written jointly with the CFTC implement provisions of the 2010 Dodd-Frank Act that establish a comprehensive framework for regulating over-the-counter derivatives.  Once both agencies adopt the final rules, they will become effective 60 days after the date of publication in the Federal Register. The compliance date of such rules for purposes of certain interim exemptions under the federal securities laws will be 180 days after the date of publication in the Federal Register. The final rule text and a fact sheet will be available after both agencies adopt the final rules.