17 CFR § 240.15Fh-4 - Antifraud provisions for security-based swap dealers and major security-based swap participants; special requirements for security-based swap dealers acting as advisors to special entities.
(3) To engage in any act, practice, or course of business that is fraudulent, deceptive, or manipulative.
(b)Special requirements for security-based swap dealers acting as advisors to special entities. A security-based swap dealer that acts as an advisor to a special entity regarding a security-based swap shall comply with the following requirements:
(1)Duty. The security-based swap dealer shall have a duty to make a reasonable determination that any security-based swap or trading strategy involving a security-based swap recommended by the security-based swap dealer is in the best interests of the special entity.
(2)Reasonable efforts. The security-based swap dealer shall make reasonable efforts to obtain such information that the security-based swap dealer considers necessary to make a reasonable determination that a security-based swap or trading strategy involving a security-based swap is in the best interests of the special entity. This information shall include, but not be limited to:
(ii) The financial status of the special entity, as well as future funding needs;
(iii) The tax status of the special entity;
(iv) The hedging, investment, financing or other objectives of the special entity;
(vii) Such other information as is relevant to the particular facts and circumstances of the special entity, market conditions and the type of security-based swap or trading strategy involving a security-based swap being recommended.
(3)Exception. The requirements of this paragraph (b) shall not apply with respect to a security-based swap if:
(ii) The security-based swap dealer does not know the identity of the counterparty at a reasonably sufficient time prior to execution of the transaction to permit the security-based swap dealer to comply with the obligations of paragraph (b) of this section.