The Dodd-Frank Act permits certain end-users to elect to use an exception to the swap clearing requirements under certain conditions, which is referred to as the end-user exception. For public companies, the ability to elect the end-user exception requires a committee of the public company to review and approve the decision to use uncleared swaps. When rules related to the end-user exception were adopted, the CFTC stated “The Commission would expect an SEC Filer’s board to set appropriate policies governing the SEC Filer’s use of swaps subject to the end- user exception and to review those policies at least annually and, as appropriate, more often upon a triggering event (e.g., a new hedging strategy is to be implemented that was not contemplated in the original board approval).” We therefore suggest public companies have a procedure for an annual or more frequent board or committee review to permit use of the end-user exception.
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