On May 23, 2013, the Securities and Exchange Commission (SEC) published in the Federal Register proposed rules and guidance for applying Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) to cross-border security-based swap (SB Swap) activities and non-U.S. persons (the Release). The SEC’s cross-border approach has some significant differences from the Commodity Futures Trading Commission’s (CFTC) approach. For one, the SEC’s Release gives more fulsome treatment of the cross-border application of Dodd Frank than the Commodity Futures Trading Commission (CFTC) has yet provided, including a proposal for a detailed process for substituted compliance with foreign regulatory systems. In addition, whereas the SEC has proposed rules and regulations specific to cross-border activities, the CFTC has only proposed interpretive guidance on the extraterritorial reach of the CFTC’s jurisdiction under the Dodd-Frank Act.

Recognizing the broad impact that cross-border application of Dodd-Frank will have, the SEC also reopened for 60 days the comment periods for several outstanding Dodd- Frank rulemakings that concern SB Swaps. By contrast, most of the CFTC’s swaps rules are already final. Different approaches between the SEC and CFTC cross border proposals create additional uncertainty as to what actions the CFTC will take, if any, when its cross-border exemptive order expires on July 12, 2013. Unless the CFTC further delays the implementation of its cross-border guidance, there will be a limited window of time for the two agencies to coordinate on cross-border issues and harmonize requirements for participants in both the swaps and SB Swaps markets.