17 CFR 240.15a-1 - Securities activities of OTC derivatives dealers.

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§ 240.15a-1 Securities activities of OTC derivatives dealers.
Preliminary Note:
OTC derivatives dealers are a special class of broker-dealers that are exempt from certain broker-dealer requirements, including membership in a self-regulatory organization240.15b9-2), regular broker-dealer margin rules240.36a1-1), and application of the Securities Investor Protection Act of 1970240.36a1-2). OTC derivative dealers are subject to special requirements, including limitations on the scope of their securities activities (§ 240.15a-1), specified internal risk management control systems (§ 240.15c3-4), recordkeeping obligations (§ 240.17a-3(a)(10)), and reporting responsibilities (§ 240.17a-12). They are also subject to alternative net capital treatment (§ 240.15c3-1(a)(5)). This rule 15a-1 uses a number of defined terms in setting forth the securities activities in which an OTC derivatives dealer may engage: “OTC derivatives dealer,” “eligible OTC derivative instrument,” “cash management securities activities,” and “ancillary portfolio management securities activities.” These terms are defined under Rules 3b-12 through 3b-15 (§ 240.3b-12 through § 240.3b-15).
(a) The securities activities of an OTC derivatives dealer shall:
(1) Be limited to:
(i) Engaging in dealer activities in eligible OTC derivative instruments that are securities;
(ii) Issuing and reacquiring securities that are issued by the dealer, including warrants on securities, hybrid securities, and structured notes;
(v) Engaging in such other securities activities that the Commission designates by order pursuant to paragraph (b)(1) of this section; and
(2) Consist primarily of the activities described in paragraphs (a)(1)(i), (a)(1)(ii), and (a)(1)(iii) of this section; and
(3) Not consist of any other securities activities, including engaging in any transaction in any security that is not an eligible OTC derivative instrument, except as permitted under paragraphs (a)(1)(iii), (a)(1)(iv), and (a)(1)(v) of this section.
(b) The Commission, by order, entered upon its own initiative or after considering an application for exemptive relief, may clarify or expand the scope of eligible OTC derivative instruments and the scope of permissible securities activities of an OTC derivatives dealer. Such orders may:
(1) Identify other permissible securities activities;
(2) Determine that a class of fungible instruments that are standardized as to their material economic terms is within the scope of eligible OTC derivative instrument;
(3) Clarify whether certain contracts, agreements, or transactions are within the scope of eligible OTC derivative instrument; or
(4) Clarify whether certain securities activities are within the scope of ancillary portfolio management securities activities.
(c) To the extent an OTC derivatives dealer engages in any securities transaction pursuant to paragraphs (a)(1)(i) through (a)(1)(v) of this section, such transaction shall be effected through a registered broker or dealer (other than an OTC derivatives dealer) that, in the case of any securities transaction pursuant to paragraphs (a)(1)(i), or (a)(1)(iii) through (a)(1)(v) of this section, is an affiliate of the OTC derivatives dealer, except that this paragraph (c) shall not apply if:
(1) The counterparty to the transaction with the OTC derivatives dealer is acting as principal and is:
(ii) A bank acting in a dealer capacity, as permitted by U.S. law;
(iv) An affiliate of the OTC derivatives dealer; or
(2) The OTC derivatives dealer is engaging in an ancillary portfolio management securities activity, and the transaction is in a foreign security, and a registered broker or dealer, a bank, or a foreign broker or dealer is acting as agent for the OTC derivatives dealer.
(d) To the extent an OTC derivatives dealer induces or attempts to induce any counterparty to enter into any securities transaction pursuant to paragraphs (a)(1)(i) through (a)(1)(v) of this section, any communication or contact with the counterparty concerning the transaction (other than clerical and ministerial activities conducted by an associated person of the OTC derivatives dealer) shall be conducted by one or more registered persons that, in the case of any securities transaction pursuant to paragraphs (a)(1)(i), or (a)(1)(iii) through (a)(1)(v) of this section, is associated with an affiliate of the OTC derivatives dealer, except that this paragraph (d) shall not apply if the counterparty to the transaction with the OTC derivatives dealer is:
(2) A bank acting in a dealer capacity, as permitted by U.S. law;
(e) For purposes of this section, the term hybrid security means a security that incorporates payment features economically similar to options, forwards, futures, swap agreements, or collars involving currencies, interest or other rates, commodities, securities, indices, quantitative measures, or other financial or economic interests or property of any kind, or any payment or delivery that is dependent on the occurrence or nonoccurrence of any event associated with a potential financial, economic, or commercial consequence (or any combination, permutation, or derivative of such contract or underlying interest).
(f) For purposes of this section, the term affiliate means any organization (whether incorporated or unincorporated) that directly or indirectly controls, is controlled by, or is under common control with, the OTC derivatives dealer.
(g) For purposes of this section, the term foreign broker or dealer means any person not resident in the United States (including any U.S. person engaged in business as a broker or dealer entirely outside the United States, except as otherwise permitted by § 240.15a-6) that is not an office or branch of, or a natural person associated with, a registered broker or dealer, whose securities activities, if conducted in the United States, would be described by the definition of “broker” in section 3(a)(4) of the Act (15 U.S.C. 78c(a)(4)) or “dealer” in section 3(a)(5) of the Act (15 U.S.C. 78c(a)(5)).
(h) For purposes of this section, the term foreign security means any security (including a depositary share issued by a United States bank, provided that the depositary share is initially offered and sold outside the United States in accordance with Regulation S (17 CFR 230.901 through 230.904)) issued by a person not organized or incorporated under the laws of the United States, provided the transaction that involves such security is not effected on a national securities exchange or on a market operated by a registered national securities association; or a debt security (including a convertible debt security) issued by an issuer organized or incorporated under the laws of the United States that is initially offered and sold outside the United States in accordance with Regulation S (17 CFR 230.901 through 230.904).
(i) For purposes of this section, the term registered person is:
(A) A natural person who is associated with a registered broker or dealer and is registered or approved under the rules of a self-regulatory organization of which such broker or dealer is a member; or
(B) If the counterparty to the transaction with the OTC derivatives dealer is a resident of a jurisdiction other than the United States, a natural person who is not resident in the United States and is associated with a broker or dealer that is registered or licensed by a foreign financial regulatory authority in the jurisdiction in which such counterparty is resident or in which such natural person is located, in accordance with applicable legal requirements, if any.
[63 FR 59396, Nov. 3, 1998]

Title 17 published on 2014-04-01

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  • 2014-10-14; vol. 79 # 198 - Tuesday, October 14, 2014
    1. 79 FR 61576 - Nationally Recognized Statistical Rating Organizations; Correction
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      SECURITIES AND EXCHANGE COMMISSION
      Final rule; correction.
      Effective November 14, 2014.
      17 CFR Parts 232, 240, 249, and 249b

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United States Code
U.S. Code: Title 7 - AGRICULTURE
U.S. Code: Title 12 - BANKS AND BANKING
U.S. Code: Title 15 - COMMERCE AND TRADE

§ 27dd

§ 77c - Classes of securities under this subchapter

§ 77d - Exempted transactions

§ 77g - Information required in registration statement

§ 77j - Information required in prospectus

§ 77s - Special powers of Commission

15 U.S. Code § 32, 33 - Repealed.

15 U.S. Code § 32, 33 - Repealed.

§ 77eee - Securities required to be registered under Securities Act

§ 77ggg - Qualification of indentures covering securities not required to be registered

§ 77nnn - Reports by obligor; evidence of compliance with indenture provisions

§ 77sss - Rules, regulations, and orders

§ 77ttt - Hearings by Commission

§ 78c - Definitions and application

15 U.S. Code § 32, 33 - Repealed.

15 U.S. Code § 32, 33 - Repealed.

§ 78d - Securities and Exchange Commission

§ 78e - Transactions on unregistered exchanges

§ 78f - National securities exchanges

§ 78g - Margin requirements

§ 78i - Manipulation of security prices

§ 78j - Manipulative and deceptive devices

15 U.S. Code § 32, 33 - Repealed.

§ 78k - Trading by members of exchanges, brokers, and dealers

15 U.S. Code § 32, 33 - Repealed.

15 U.S. Code § -

§ 78m - Periodical and other reports

§ 78n - Proxies

15 U.S. Code § -

15 U.S. Code § 32, 33 - Repealed.

15 U.S. Code § 32, 33 - Repealed.

§ 78p - Directors, officers, and principal stockholders

§ 78q - Records and reports

15 U.S. Code § 32, 33 - Repealed.

§ 78s - Registration, responsibilities, and oversight of self-regulatory organizations

15 U.S. Code § 32, 33 - Repealed.

§ 78w - Rules, regulations, and orders; annual reports

§ 78x - Public availability of information

15 U.S. Code § -

§ 78mm - General exemptive authority

15 U.S. Code § 79 to 79z–6 - Repealed.

15 U.S. Code § 79 to 79z–6 - Repealed.

15 U.S. Code § 79 to 79z–6 - Repealed.

15 U.S. Code § 79 to 79z–6 - Repealed.

15 U.S. Code § 79 to 79z–6 - Repealed.

15 U.S. Code § 79 to 79z–6 - Repealed.

15 U.S. Code § 79 to 79z–6 - Repealed.

§ 7201 - Definitions

§ 7202 - Commission rules and enforcement

§ 8302 - Review of regulatory authority

U.S. Code: Title 18 - CRIMES AND CRIMINAL PROCEDURE
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 240 after this date.

  • 2014-11-20; vol. 79 # 224 - Thursday, November 20, 2014
    1. 79 FR 69073 - Forward Contracts With Embedded Volumetric Optionality
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      SECURITIES AND EXCHANGE COMMISSION, COMMODITY FUTURES TRADING COMMISSION
      Proposed interpretation.
      Comments must be received on or before December 22, 2014.
      17 CFR Part 1