The SEC has provided additional guidance to clarify which U.S. securities laws will apply to security-based swaps starting July 16 — the effective date of Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The SEC approved an order granting temporary relief and interpretive guidance to make clear that a substantial number of the requirements of the Exchange Act applicable to securities will not apply to security-based swaps when the revised definition of “security” goes into effect on July 16. Nevertheless, federal securities laws prohibiting fraud and manipulation will continue to apply to security-based swaps after that date. To enhance legal certainty for market participants, the SEC also provided temporary relief from provisions of U.S. securities laws that allow the voiding of contracts made in violation of those laws.
In addition, the SEC approved an interim final rule providing exemptions from the Securities Act, Trust Indenture Act and other provisions of the federal securities laws to allow certain security-based swaps to continue to trade and be cleared as they have pre-Dodd-Frank. That interim relief will extend until the Commission adopts rules further defining “security-based swap” and “eligible contract participant.”
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