Beginning April 10, 2013, counterparties to swaps and certain foreign exchange transactions will be required to comply with substantial new reporting and recordkeeping requirements under Parts 43, 45 and 46 of the rules of the Commodity Futures Trading Commission.
For most market participants engaged in swaps, compliance with the CFTC’s final reporting and recordkeeping rules will be required beginning April 10, 2013, absent possible last-minute CFTC relief extending this deadline. The reporting and recordkeeping requirements apply (a) to new swaps entered into on or after April 10, 2013, (b) to swaps entered into prior to July 21, 2010 the terms of which had not expired as of July 21, 2010, and (c) to swaps entered into on or after July 21, 2010, but before April 10, 2013. For purposes of the reporting and recordkeeping rules, foreign exchange forwards and foreign exchange swaps are treated as if they were swaps. The reporting and recordkeeping rules do not apply to transactions in which neither counterparty is a U.S. person.1 However, the rules do apply to swaps between affiliates where one or both affiliates are U.S. persons. Information about all swaps reported to a swap data repository will be made available to various regulatory agencies. Information concerning swaps (but not foreign exchange forwards or foreign exchange swaps) will also be publicly disseminated in a manner that does not identify the counterparties.
Determination of the proper reporting counterparty for a swap is complex. However, in a transaction between a CFTC-registered swap dealer and a non-swap dealer, the swap dealer will be required to act as the reporting counterparty. Recordkeeping obligations will apply to both counterparties.
The Dodd-Frank Wall Street Reform and Consumer Protection Act, which was signed into law by President Obama on July 21, 2010, created a comprehensive reporting and recordkeeping regime applicable to “swaps.” The Dodd-Frank Act also created a comprehensive reporting and recordkeeping regime applicable to “security-based swaps.” While the Securities and Exchange Commission, which is responsible for writing rules with respect to security-based swaps, has not yet enacted final implementing regulations, the CFTC has finalized substantially all of the regulations requiring reporting and recordkeeping with respect to swaps regulated by the CFTC.
1The CFTC has provided an interim definition of U.S. person that includes (a) a natural person who is a resident of the United States; (ii) a corporation, partnership, limited liability company, business or other trust, association, joint-stock company, fund or any form of enterprise similar to any of the foregoing, in each case that is (A) organized or incorporated under the laws of a state or other jurisdiction in the United States or (B) effective as of April 1, 2013 for all such entities other than funds or collective investment vehicles, having its principal place of business in the United States; (iii) a pension plan for the employees, officers or principals of a legal entity described in (ii) above, unless the pension plan is primarily for foreign employees of such entity; (iv) an estate of a decedent who was a resident of the United States at the time of death, or a trust governed by the laws of a state or other jurisdiction in the United States if a court within the United States is able to exercise primary supervision over the administration of the trust; or (v) an individual account or joint account (discretionary or not) where the beneficial owner (or one of the beneficial owners in the case of a joint account) is a person described in (i) through (iv).
The Investment Funds Practice of Sidley Austin LLP
Sidley has a premier, global practice in structuring and advising investment funds and advisers. We advise clients in the formation and operation of all types of alternative investment vehicles, including hedge funds, fund-of-funds, commodity pools, venture capital and private equity funds, private real estate funds and other public and private pooled investment vehicles. We also represent clients with respect to more traditional investment funds, such as closed-end and open-end registered investment companies (i.e., mutual funds) and exchange-traded funds (ETFs). Our advice covers the broad scope of legal and compliance issues that are faced by funds and their boards, as well as investment advisers to funds and other investment products and accounts, under the laws and regulations of the various jurisdictions in which they may operate. In particular, we advise our clients regarding complex federal and state laws and regulations governing securities, commodities, funds and advisers, including the Dodd-Frank Act, the Investment Company Act of 1940, the Investment Advisers Act of 1940, the Securities Act of 1933, the Securities Exchange Act of 1934, the Commodity Exchange Act, the USA PATRIOT Act and comparable laws in non-U.S. jurisdictions. Our practice group consists of approximately 120 lawyers in New York, Chicago, London, Hong Kong, Singapore, Shanghai, Tokyo, Los Angeles and San Francisco.
The Securities and Futures Regulatory Practice of Sidley Austin LLP
Sidley Austin LLP has one of the nation’s premier securities and futures regulatory practices, with more than 50 lawyers spanning Sidley offices in the United States, Europe and Asia. Lawyers in this practice group represent major investment banks, broker-dealers, futures commission merchants, commercial banks, insurance companies, hedge funds complexes, alternative trading systems and ECNs, and exchanges, both domestic and foreign. Drawing from its breadth and depth, Sidley’s Securities and Futures Regulatory group handles a wide spectrum of matters—assisting clients with the formation of their businesses; counseling on general compliance, proposed laws and regulations, and regulatory trends; representing clients on securities and derivatives transactions; and defending firms in regulatory inquiries and enforcement proceedings.
Over the Counter Derivatives Transactions
Our derivatives lawyers have extensive experience with structuring and documenting transactions involving derivatives and related trading and financing techniques, including swaps, futures, options, forwards, collars, repurchase agreements, novations, participation agreements and over the counter trading documentation such as prime brokerage agreements and master give-up agreements. These services are utilized by the firm’s corporate, commercial and investment banking, insurance, securitization, investment fund and real estate clients. We also represent banks, dealers and end-users in credit default swaps, total return swaps, alternative risk transfer transactions such as catastrophe swaps and longevity and mortality swaps, as well as other derivatives transactions in hedging currency
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