§ 6s. Registration and regulation of swap dealers and major swap participants
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(a) Registration (1) Swap dealers It shall be unlawful for any person to act as a swap dealer unless the person is registered as a swap dealer with the Commission.
(2) Major swap participants It shall be unlawful for any person to act as a major swap participant unless the person is registered as a major swap participant with the Commission.
(b) Requirements (1) In general A person shall register as a swap dealer or major swap participant by filing a registration application with the Commission.
(2) Contents (A) In general The application shall be made in such form and manner as prescribed by the Commission, and shall contain such information, as the Commission considers necessary concerning the business in which the applicant is or will be engaged.
(B) Continual reporting A person that is registered as a swap dealer or major swap participant shall continue to submit to the Commission reports that contain such information pertaining to the business of the person as the Commission may require.
(3) Expiration Each registration under this section shall expire at such time as the Commission may prescribe by rule or regulation.
(4) Rules Except as provided in subsections (d) and (e), the Commission may prescribe rules applicable to swap dealers and major swap participants, including rules that limit the activities of swap dealers and major swap participants.
(5) Transition Rules under this section shall provide for the registration of swap dealers and major swap participants not later than 1 year after
July 21, 2010 .(6) Statutory disqualification Except to the extent otherwise specifically provided by rule, regulation, or order, it shall be unlawful for a swap dealer or a major swap participant to permit any person associated with a swap dealer or a major swap participant who is subject to a statutory disqualification to effect or be involved in effecting swaps on behalf of the swap dealer or major swap participant, if the swap dealer or major swap participant knew, or in the exercise of reasonable care should have known, of the statutory disqualification.
(c) Dual registration (1) Swap dealer Any person that is required to be registered as a swap dealer under this section shall register with the Commission regardless of whether the person also is a depository institution or is registered with the Securities and Exchange Commission as a security-based swap dealer.
(2) Major swap participant Any person that is required to be registered as a major swap participant under this section shall register with the Commission regardless of whether the person also is a depository institution or is registered with the Securities and Exchange Commission as a major security-based swap participant.
(d) Rulemakings (1) In general The Commission shall adopt rules for persons that are registered as swap dealers or major swap participants under this section.
(2) Exception for prudential requirements (A) In general The Commission may not prescribe rules imposing prudential requirements on swap dealers or major swap participants for which there is a prudential regulator.
(B) Applicability Subparagraph (A) does not limit the authority of the Commission to prescribe rules as directed under this section.
(e) Capital and margin requirements (1) In general (A) Swap dealers and major swap participants that are banks Each registered swap dealer and major swap participant for which there is a prudential regulator shall meet such minimum capital requirements and minimum initial and variation margin requirements as the prudential regulator shall by rule or regulation prescribe under paragraph (2)(A).
(B) Swap dealers and major swap participants that are not banks Each registered swap dealer and major swap participant for which there is not a prudential regulator shall meet such minimum capital requirements and minimum initial and variation margin requirements as the Commission shall by rule or regulation prescribe under paragraph (2)(B).
(2) Rules (A) Swap dealers and major swap participants that are banks The prudential regulators, in consultation with the Commission and the Securities and Exchange Commission, shall jointly adopt rules for swap dealers and major swap participants, with respect to their activities as a swap dealer or major swap participant, for which there is a prudential regulator imposing— (i) capital requirements; and (ii) both initial and variation margin requirements on all swaps that are not cleared by a registered derivatives clearing organization. (B) Swap dealers and major swap participants that are not banks The Commission shall adopt rules for swap dealers and major swap participants, with respect to their activities as a swap dealer or major swap participant, for which there is not a prudential regulator imposing— (i) capital requirements; and (ii) both initial and variation margin requirements on all swaps that are not cleared by a registered derivatives clearing organization. (C) Capital In setting capital requirements for a person that is designated as a swap dealer or a major swap participant for a single type or single class or category of swap or activities, the prudential regulator and the Commission shall take into account the risks associated with other types of swaps or classes of swaps or categories of swaps engaged in and the other activities conducted by that person that are not otherwise subject to regulation applicable to that person by virtue of the status of the person as a swap dealer or a major swap participant.
(3) Standards for capital and margin (A) In general To offset the greater risk to the swap dealer or major swap participant and the financial system arising from the use of swaps that are not cleared, the requirements imposed under paragraph (2) shall— (i) help ensure the safety and soundness of the swap dealer or major swap participant; and (ii) be appropriate for the risk associated with the non-cleared swaps held as a swap dealer or major swap participant. (B) Rule of construction (i) In general Nothing in this section shall limit, or be construed to limit, the authority— (I) of the Commission to set financial responsibility rules for a futures commission merchant or introducing broker registered pursuant to section 6f(a) of this title (except for section 6f(a)(3) of this title) in accordance with section 6f(b) of this title; or (II) of the Securities and Exchange Commission to set financial responsibility rules for a broker or dealer registered pursuant to section 15(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(b)) (except for section 15(b)(11) of that Act (15 U.S.C. 78o(b)(11)) of 1974 [29 U.S.C. 1001 et seq.], is a fiduciary as defined in section 3 of that Act (29 U.S.C. 1002); and (ii) before the initiation of the transaction, disclose to the Special Entity in writing the capacity in which the swap dealer is acting; and (B) the Commission may establish such other standards and requirements as the Commission may determine are appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of this chapter. (6) Rules The Commission shall prescribe rules under this subsection governing business conduct standards for swap dealers and major swap participants.
(7) Applicability This section shall not apply with respect to a transaction that is— (A) initiated by a Special Entity on an exchange or swap execution facility; and (B) one in which the swap dealer or major swap participant does not know the identity of the counterparty to the transaction. (i) Documentation standards (1) In general Each registered swap dealer and major swap participant shall conform with such standards as may be prescribed by the Commission by rule or regulation that relate to timely and accurate confirmation, processing, netting, documentation, and valuation of all swaps.
(2) Rules The Commission shall adopt rules governing documentation standards for swap dealers and major swap participants.
(j) Duties Each registered swap dealer and major swap participant at all times shall comply with the following requirements: (1) Monitoring of trading The swap dealer or major swap participant shall monitor its trading in swaps to prevent violations of applicable position limits.
(2) Risk management procedures The swap dealer or major swap participant shall establish robust and professional risk management systems adequate for managing the day-to-day business of the swap dealer or major swap participant.
(3) Disclosure of general information The swap dealer or major swap participant shall disclose to the Commission and to the prudential regulator for the swap dealer or major swap participant, as applicable, information concerning— (A) terms and conditions of its swaps; (B) swap trading operations, mechanisms, and practices; (C) financial integrity protections relating to swaps; and (D) other information relevant to its trading in swaps. (4) Ability to obtain information The swap dealer or major swap participant shall— (A) establish and enforce internal systems and procedures to obtain any necessary information to perform any of the functions described in this section; and (B) provide the information to the Commission and to the prudential regulator for the swap dealer or major swap participant, as applicable, on request. (5) Conflicts of interest The swap dealer and major swap participant shall implement conflict-of-interest systems and procedures that— (A) establish structural and institutional safeguards to ensure that the activities of any person within the firm relating to research or analysis of the price or market for any commodity or swap or acting in a role of providing clearing activities or making determinations as to accepting clearing customers are separated by appropriate informational partitions within the firm from the review, pressure, or oversight of persons whose involvement in pricing, trading, or clearing activities might potentially bias their judgment or supervision and contravene the core principles of open access and the business conduct standards described in this chapter; and (B) address such other issues as the Commission determines to be appropriate. (6) Antitrust considerations Unless necessary or appropriate to achieve the purposes of this chapter, a swap dealer or major swap participant shall not— (A) adopt any process or take any action that results in any unreasonable restraint of trade; or (B) impose any material anticompetitive burden on trading or clearing. (7) Rules The Commission shall prescribe rules under this subsection governing duties of swap dealers and major swap participants.
(k) Designation of chief compliance officer (1) In general Each swap dealer and major swap participant shall designate an individual to serve as a chief compliance officer.
(2) Duties The chief compliance officer shall— (A) report directly to the board or to the senior officer of the swap dealer or major swap participant; (B) review the compliance of the swap dealer or major swap participant with respect to the swap dealer and major swap participant requirements described in this section; (C) in consultation with the board of directors, a body performing a function similar to the board, or the senior officer of the organization, resolve any conflicts of interest that may arise; (D) be responsible for administering each policy and procedure that is required to be established pursuant to this section; (E) ensure compliance with this chapter (including regulations) relating to swaps, including each rule prescribed by the Commission under this section; (F) establish procedures for the remediation of noncompliance issues identified by the chief compliance officer through any— (i) compliance office review; (ii) look-back; (iii) internal or external audit finding; (iv) self-reported error; or (v) validated complaint; and (G) establish and follow appropriate procedures for the handling, management response, remediation, retesting, and closing of noncompliance issues. (3) Annual reports (A) In general In accordance with rules prescribed by the Commission, the chief compliance officer shall annually prepare and sign a report that contains a description of— (i) the compliance of the swap dealer or major swap participant with respect to this chapter (including regulations); and (ii) each policy and procedure of the swap dealer or major swap participant of the chief compliance officer (including the code of ethics and conflict of interest policies). (B) Requirements A compliance report under subparagraph (A) shall— (i) accompany each appropriate financial report of the swap dealer or major swap participant that is required to be furnished to the Commission pursuant to this section; and (ii) include a certification that, under penalty of law, the compliance report is accurate and complete. (l) Segregation requirements (1) Segregation of assets held as collateral in uncleared swap transactions (A) Notification A swap dealer or major swap participant shall be required to notify the counterparty of the swap dealer or major swap participant at the beginning of a swap transaction that the counterparty has the right to require segregation of the funds or other property supplied to margin, guarantee, or secure the obligations of the counterparty.
(B) Segregation and maintenance of funds At the request of a counterparty to a swap that provides funds or other property to a swap dealer or major swap participant to margin, guarantee, or secure the obligations of the counterparty, the swap dealer or major swap participant shall— (i) segregate the funds or other property for the benefit of the counterparty; and (ii) in accordance with such rules and regulations as the Commission may promulgate, maintain the funds or other property in a segregated account separate from the assets and other interests of the swap dealer or major swap participant. (2) Applicability The requirements described in paragraph (1) shall— (A) apply only to a swap between a counterparty and a swap dealer or major swap participant that is not submitted for clearing to a derivatives clearing organization; and (B) (i) not apply to variation margin payments; or (ii) not preclude any commercial arrangement regarding— (I) the investment of segregated funds or other property that may only be invested in such investments as the Commission may permit by rule or regulation; and (II) the related allocation of gains and losses resulting from any investment of the segregated funds or other property. (3) Use of independent third-party custodians The segregated account described in paragraph (1) shall be— (A) carried by an independent third-party custodian; and (B) designated as a segregated account for and on behalf of the counterparty. (4) Reporting requirement If the counterparty does not choose to require segregation of the funds or other property supplied to margin, guarantee, or secure the obligations of the counterparty, the swap dealer or major swap participant shall report to the counterparty of the swap dealer or major swap participant on a quarterly basis that the back office procedures of the swap dealer or major swap participant relating to margin and collateral requirements are in compliance with the agreement of the counterparties.
References In Text
The Securities Exchange Act of 1934, referred to in subsec. (e)(3)(B)(ii), is act June 6, 1934, ch. 404, 48 Stat. 881, which is classified principally to chapter 2B (§ 78a et seq.) of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see section 78a of Title 15 and Tables.
The Employee Retirement Income Security Act of 1974, referred to in subsec. (h)(5)(A)(i)(VII), is Pub. L. 93–406,
Amendments
2010—Subsec. (l). Pub. L. 111–203, § 724(c), added subsec. (l).
Effective Date
Section and amendment by Pub. L. 111–203 effective on the later of 360 days after