17 CFR 23.440 - Requirements for swap dealers acting as advisors to Special Entities.

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§ 23.440 Requirements for swap dealers acting as advisors to Special Entities.
(a) Acts as an advisor to a Special Entity. For purposes of this section, a swap dealer “acts as an advisor to a Special Entity” when the swap dealer recommends a swap or trading strategy involving a swap that is tailored to the particular needs or characteristics of the Special Entity.
(b) Safe harbors. A swap dealer will not “act as an advisor to a Special Entity” within the meaning of paragraph (a) of this section if:
(1) With respect to a Special Entity that is an employee benefit plan as defined in § 23.401(c)(3):
(i) The Special Entity represents in writing that it has a fiduciary as defined in Section 3 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002) that is responsible for representing the Special Entity in connection with the swap transaction;
(ii) The fiduciary represents in writing that it will not rely on recommendations provided by the swap dealer; and
(iii) The Special Entity represents in writing:
(A) That it will comply in good faith with written policies and procedures reasonably designed to ensure that any recommendation the Special Entity receives from the swap dealer materially affecting a swap transaction is evaluated by a fiduciary before the transaction occurs; or
(B) That any recommendation the Special Entity receives from the swap dealer materially affecting a swap transaction will be evaluated by a fiduciary before that transaction occurs; or
(2) With respect to any Special Entity:
(i) The swap dealer does not express an opinion as to whether the Special Entity should enter into a recommended swap or trading strategy involving a swap that is tailored to the particular needs or characteristics of the Special Entity;
(ii) The Special Entity represents in writing that:
(A) The Special Entity will not rely on recommendations provided by the swap dealer; and
(B) The Special Entity will rely on advice from a qualified independent representative within the meaning of § 23.450; and
(iii) The swap dealer discloses to the Special Entity that it is not undertaking to act in the best interests of the Special Entity as otherwise required by this section.
(c) A swap dealer that acts as an advisor to a Special Entity shall comply with the following requirements:
(1) Duty. Any swap dealer that acts as an advisor to a Special Entity shall have a duty to make a reasonable determination that any swap or trading strategy involving a swap recommended by the swap dealer is in the best interests of the Special Entity.
(2) Reasonable efforts. Any swap dealer that acts as an advisor to a Special Entity shall make reasonable efforts to obtain such information as is necessary to make a reasonable determination that any swap or trading strategy involving a swap recommended by the swap dealer is in the best interests of the Special Entity, including information relating to:
(i) The financial status of the Special Entity, as well as the Special Entity's future funding needs;
(ii) The tax status of the Special Entity;
(iii) The hedging, investment, financing, or other objectives of the Special Entity;
(iv) The experience of the Special Entity with respect to entering into swaps, generally, and swaps of the type and complexity being recommended;
(v) Whether the Special Entity has the financial capability to withstand changes in market conditions during the term of the swap; and
(vi) Such other information as is relevant to the particular facts and circumstances of the Special Entity, market conditions, and the type of swap or trading strategy involving a swap being recommended.
(d) Reasonable reliance on representations of the Special Entity. As provided in § 23.402(d), the swap dealer may rely on written representations of the Special Entity to satisfy its requirement in paragraph (c)(2) of this section to make “reasonable efforts” to obtain necessary information.

Title 17 published on 2014-04-01

The following are only the Rules published in the Federal Register after the published date of Title 17.

For a complete list of all Rules, Proposed Rules, and Notices view the Rulemaking tab.

  • 2014-07-15; vol. 79 # 135 - Tuesday, July 15, 2014
    1. 79 FR 41126 - Swap Dealer and Major Swap Participant Recordkeeping, Reporting, and Duties Rules; Futures Commission Merchant and Introducing Broker Conflicts of Interest Rules; and Chief Compliance Officer Rules for Swap Dealers, Major Swap Participants, and Futures Commission Merchants; Correction
      GPO FDSys XML | Text
      COMMODITY FUTURES TRADING COMMISSION
      Correcting amendments.
      Effective July 15, 2014.
      17 CFR Part 23

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United States Code
Statutes at Large

Title 17 published on 2014-04-01

The following are ALL rules, proposed rules, and notices (chronologically) published in the Federal Register relating to 17 CFR 23 after this date.

  • 2014-07-15; vol. 79 # 135 - Tuesday, July 15, 2014
    1. 79 FR 41126 - Swap Dealer and Major Swap Participant Recordkeeping, Reporting, and Duties Rules; Futures Commission Merchant and Introducing Broker Conflicts of Interest Rules; and Chief Compliance Officer Rules for Swap Dealers, Major Swap Participants, and Futures Commission Merchants; Correction
      GPO FDSys XML | Text
      COMMODITY FUTURES TRADING COMMISSION
      Correcting amendments.
      Effective July 15, 2014.
      17 CFR Part 23