On June 25, 2014, the Securities and Exchange Commission (SEC) re-started its rulemaking for security-based swaps (SBS) under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") by adopting a first installment of rules (the "Rules") that are applicable to SBS involving persons and entities located outside the United States. The SEC took into consideration many of the comments made on the proposed cross-border rules it issued in 2012 (the "Proposed Rules"), so the Rules are different in numerous ways from the Proposed Rules. The Rules are broadly consistent with the positions taken by the Commodity Futures Trading Commission (CFTC) in its "Interpretive Guidance and Policy Statement Regarding Compliance with Certain Swap Regulations" (the "Final Guidance"), but they are formal rules rather than mere guidance.[2] Although the Rules will become effective on September 7, 2014, market participants will not have to comply with them until the SEC adopts the rest of the substantive rules necessary to complete the regulatory regime for security-based swaps created by the Dodd-Frank Act. In the meanwhile, the most active market participants can use the Rules to estimate more accurately the possibility of needing to register with the SEC because of their SBS activity.

II. Executive Summary -

The Rules, which were adopted under the Securities Exchange Act of 1934 (the "Exchange Act"), cover the following swap topics:

1.Rule 3a71-3 contains definitions and rules to be used in analyzing cross-border security-based swap dealing activity and determining when registration with the SEC is required. The key definitions provided are ones for "U.S. person" and "conduit affiliate."

2.Rule 3a67-10 contains rules for the application of major security-based swap participant tests in the cross-border context.

3.Rule 0.13 provides SEC procedures for filing applications to request substituted compliance orders under the Exchange Act.