• SEC Proposal Would Exempt From Registration Some Communications Involving Swaps
  • September 25, 2014 | Authors: Luke B. Falgoust; J. Marshall Page
  • Law Firm: Jones Walker LLP - New Orleans Office
  • On September 8, the Securities and Exchange Commission ("SEC") proposed a rule to exempt certain communications involving security-based swaps from the registration requirements of the Securities Act of 1933 (the "Securities Act"). The proposed Rule 135d would apply to the publication or distribution of price quotes for security-based swaps and any guarantees of such swaps that may be purchased only by eligible contract participants.

    The motivation for the proposed rule is that the publication or distribution of price quotes for security-based swaps that are traded or processed through trading platforms could be viewed as offers of those security-based swaps within the meaning of Section 2(3) of the Securities Act, and such communications would require compliance with the registration provisions of Section 5 of the Securities Act unless there is an available exemption.

    The proposed rule is designed to permit security-based swap transactions between eligible contract participants to continue to be able to rely on available exemptions from the registration requirements of the Securities Act without unintended consequences for the operation of security-based swap execution facilities and national securities exchanges that post or trade security-based swaps following the full implementation of Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Title VII amended the Securities Act to include "security-based swaps" in the definition of "security" for purposes of those statutes and directed the SEC to create a regulatory framework for over-the-counter derivatives.

    The proposed rule would not limit the scope or applicability of the anti-fraud or other provisions of the federal securities laws relating to material misstatements and omissions in the offer and sale of securities, including security-based swaps. The proposal is open for a 60-day comment period upon publication in the Federal Register.