7 U.S.C. § 6s: Registration and regulation of swap dealers and major swap participants

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. 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. A person shall register as a swap dealer or major swap participant by filing a registration application with the Commission. 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. 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. Each registration under this section shall expire at such time as the Commission may prescribe by rule or regulation. 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. 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 . 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. 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. 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. The Commission shall adopt rules for persons that are registered as swap dealers or major swap participants under this section. The Commission may not prescribe rules imposing prudential requirements on swap dealers or major swap participants for which there is a prudential regulator. Subparagraph (A) does not limit the authority of the Commission to prescribe rules as directed under this section. 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). 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). capital requirements; and both initial and variation margin requirements on all swaps that are not cleared by a registered derivatives clearing organization. capital requirements; and both initial and variation margin requirements on all swaps that are not cleared by a registered derivatives clearing organization. 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. help ensure the safety and soundness of the swap dealer or major swap participant; and be appropriate for the risk associated with the non-cleared swaps held as a swap dealer or major swap participant. 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 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. 78 o (b)) (except for section 15(b)(11) of that Act ( 15 U.S.C. 78 o (b)(11)) 1 in accordance with section 15(c)(3) of the Securities Exchange Act of 1934 ( 1 So in original. Probably should be followed by a third closing parenthesis. 15 U.S.C. 78 o (c)(3)). A futures commission merchant, introducing broker, broker, or dealer shall maintain sufficient capital to comply with the stricter of any applicable capital requirements to which such futures commission merchant, introducing broker, broker, or dealer is subject to under this chapter or the Securities Exchange Act of 1934 ( 15 U.S.C. 78a et seq.). preserving the financial integrity of markets trading swaps; and preserving the stability of the United States financial system. The prudential regulators, the Commission, and the Securities and Exchange Commission shall periodically (but not less frequently than annually) consult on minimum capital requirements and minimum initial and variation margin requirements. swap dealers; and major swap participants. The requirements of paragraphs (2)(A)(ii) and (2)(B)(ii), including the initial and variation margin requirements imposed by rules adopted pursuant to paragraphs (2)(A)(ii) and (2)(B)(ii), shall not apply to a swap in which a counterparty qualifies for an exception under section 2(h)(7)(A) of this title , or an exemption issued under section 6(c)(1) of this title from the requirements of section 2(h)(1)(A) of this title for cooperative entities as defined in such exemption, or satisfies the criteria in section 2(h)(7)(D) of this title . shall make such reports as are required by the Commission by rule or regulation regarding the transactions and positions and financial condition of the registered swap dealer or major swap participant; for which there is a prudential regulator, shall keep books and records of all activities related to the business as a swap dealer or major swap participant in such form and manner and for such period as may be prescribed by the Commission by rule or regulation; and for which there is no prudential regulator, shall keep books and records in such form and manner and for such period as may be prescribed by the Commission by rule or regulation; shall keep books and records described in subparagraph (B) open to inspection and examination by any representative of the Commission; and shall keep any such books and records relating to swaps defined in section 1a(47)(A)(v) of this title open to inspection and examination by the Securities and Exchange Commission. The Commission shall adopt rules governing reporting and recordkeeping for swap dealers and major swap participants. Each registered swap dealer and major swap participant shall maintain daily trading records of the swaps of the registered swap dealer and major swap participant and all related records (including related cash or forward transactions) and recorded communications, including electronic mail, instant messages, and recordings of telephone calls, for such period as may be required by the Commission by rule or regulation. The daily trading records shall include such information as the Commission shall require by rule or regulation. Each registered swap dealer and major swap participant shall maintain daily trading records for each counterparty in a manner and form that is identifiable with each swap transaction. Each registered swap dealer and major swap participant shall maintain a complete audit trail for conducting comprehensive and accurate trade reconstructions. The Commission shall adopt rules governing daily trading records for swap dealers and major swap participants. fraud, manipulation, and other abusive practices involving swaps (including swaps that are offered but not entered into); diligent supervision of the business of the registered swap dealer and major swap participant; adherence to all applicable position limits; and such other matters as the Commission determines to be appropriate. A swap dealer or major swap participant that acts as an advisor to a special entity regarding a swap shall comply with the requirements of subparagraph (4) with respect to such Special Entity. A swap dealer that enters into or offers to enter into swap 2 with a Special Entity shall comply with the requirements of subparagraph (5) with respect to such Special Entity. 2 So in original. Probably should be preceded by “a”. a Federal agency; a State, State agency, city, county, municipality, or other political subdivision of a State; any employee benefit plan, as defined in section 3 of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1002 ); any governmental plan, as defined in section 3 of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1002 ); or any endowment, including an endowment that is an organization described in section 501(c)(3) of title 26 . establish a duty for a swap dealer or major swap participant to verify that any counterparty meets the eligibility standards for an eligible contract participant; information about the material risks and characteristics of the swap; any material incentives or conflicts of interest that the swap dealer or major swap participant may have in connection with the swap; and for cleared swaps, upon the request of the counterparty, receipt of the daily mark of the transaction from the appropriate derivatives clearing organization; and for uncleared swaps, receipt of the daily mark of the transaction from the swap dealer or the major swap participant; establish a duty for a swap dealer or major swap participant to communicate in a fair and balanced manner based on principles of fair dealing and good faith; and 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. to employ any device, scheme, or artifice to defraud any Special Entity or prospective customer who is a Special Entity; to engage in any transaction, practice, or course of business that operates as a fraud or deceit on any Special Entity or prospective customer who is a Special Entity; or to engage in any act, practice, or course of business that is fraudulent, deceptive or manipulative. Any swap dealer that acts as an advisor to a Special Entity shall have a duty to act in the best interests of the Special Entity. the financial status of the Special Entity; the tax status of the Special Entity; the investment or financing objectives of the Special Entity; and any other information that the Commission may prescribe by rule or regulation. has sufficient knowledge to evaluate the transaction and risks; is not subject to a statutory disqualification; is independent of the swap dealer or major swap participant; undertakes a duty to act in the best interests of the counterparty it represents; makes appropriate disclosures; will provide written representations to the Special Entity regarding fair pricing and the appropriateness of the transaction; and in the case of employee benefit plans subject to the Employee Retirement Income Security act 4 of 1974 [ 4 So in original. Probably should be “Act”. 29 U.S.C. 1001 et seq.], is a fiduciary as defined in section 3 of that Act ( 29 U.S.C. 1002 ); and before the initiation of the transaction, disclose to the Special Entity in writing the capacity in which the swap dealer is acting; and 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. The Commission shall prescribe rules under this subsection governing business conduct standards for swap dealers and major swap participants. initiated by a Special Entity on an exchange or swap execution facility; and one in which the swap dealer or major swap participant does not know the identity of the counterparty to the transaction. 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. The Commission shall adopt rules governing documentation standards for swap dealers and major swap participants. The swap dealer or major swap participant shall monitor its trading in swaps to prevent violations of applicable position limits. 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. terms and conditions of its swaps; swap trading operations, mechanisms, and practices; financial integrity protections relating to swaps; and other information relevant to its trading in swaps. establish and enforce internal systems and procedures to obtain any necessary information to perform any of the functions described in this section; and provide the information to the Commission and to the prudential regulator for the swap dealer or major swap participant, as applicable, on request. 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 address such other issues as the Commission determines to be appropriate. adopt any process or take any action that results in any unreasonable restraint of trade; or impose any material anticompetitive burden on trading or clearing. The Commission shall prescribe rules under this subsection governing duties of swap dealers and major swap participants. Each swap dealer and major swap participant shall designate an individual to serve as a chief compliance officer. report directly to the board or to the senior officer of the swap dealer or major swap participant; 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; 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; be responsible for administering each policy and procedure that is required to be established pursuant to this section; ensure compliance with this chapter (including regulations) relating to swaps, including each rule prescribed by the Commission under this section; compliance office review; look-back; internal or external audit finding; self-reported error; or validated complaint; and establish and follow appropriate procedures for the handling, management response, remediation, retesting, and closing of noncompliance issues. the compliance of the swap dealer or major swap participant with respect to this chapter (including regulations); and 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). 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 include a certification that, under penalty of law, the compliance report is accurate and complete. 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. segregate the funds or other property for the benefit of the counterparty; and 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. 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 not apply to variation margin payments; or 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 the related allocation of gains and losses resulting from any investment of the segregated funds or other property. carried by an independent third-party custodian; and designated as a segregated account for and on behalf of the counterparty. 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. chapter 35 of title 44, United States Code; and the notice and comment provisions of section 553 of title 5 , United States Code; through the promulgation of an interim final rule, pursuant to which public comment will be sought before a final rule is issued; and such that paragraph (1) shall apply solely to changes to rules and regulations, or proposed rules and regulations, that are limited to and directly a consequence of such amendments.”