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[House Report 112-344]
[From the U.S. Government Printing Office]


112th Congress                                            Rept. 112-344
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     Part 1

======================================================================

 
 TO EXEMPT INTER-AFFILIATE SWAPS FROM CERTAIN REGULATORY REQUIREMENTS 
    PUT IN PLACE BY THE DODD-FRANK WALL STREET REFORM AND CONSUMER 
                             PROTECTION ACT

                                _______
                                

               December 23, 2011.--Ordered to be printed

                                _______
                                

  Mr. Bachus, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 2779]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 2779) to exempt inter-affiliate swaps from 
certain regulatory requirements put in place by the Dodd-Frank 
Wall Street Reform and Consumer Protection Act, having 
considered the same, report favorably thereon with an amendment 
and recommend that the bill as amended do pass.
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. TREATMENT OF AFFILIATE TRANSACTIONS.

  (a) Commodity Exchange Act Amendments.--Section 1a(47) of the 
Commodity Exchange Act (7 U.S.C. 1(a)(47)), as added by section 
721(a)(21) of the Dodd-Frank Wall Street Reform and Consumer Protection 
Act, is amended by adding at the end the following:
                  ``(G) Treatment of affiliate transactions.--
                          ``(i) In general.--The term `swap' does not 
                        include any agreement, contract, or transaction 
                        that--
                                  ``(I) would otherwise be included as 
                                a `swap' under subparagraph (A); and
                                  ``(II) is entered into by a party 
                                that is controlling, controlled by, or 
                                under common control with its 
                                counterparty.
                          ``(ii) Reporting.--All agreements, contracts, 
                        or transactions described in clause (i) shall 
                        be reported to either a swap data repository, 
                        or, if there is no swap data repository that 
                        would accept such swaps, to the Commission 
                        pursuant to section 4r within such time period 
                        as the Commission may by rule or regulation 
                        prescribe.''.
  (b) Securities Exchange Act of 1934 Amendments.--Section 3(a)(68) of 
the Securities Exchange Act of 1934 (15 U.S.C. 78c(3)(a)(68)), as added 
by section 761(a)(6) of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act, is amended by adding at the end the following:
                  ``(F) Treatment of affiliate transactions.--
                          ``(i) In general.--For the purposes of any 
                        clearing and execution requirements under 
                        sections 3C and any applicable margin and 
                        capital requirements of section 15F(e), and for 
                        purposes of defining a security-based swap 
                        dealer or a major security-based swap 
                        participant, and reporting requirements other 
                        than those set forth in clause (ii), the term 
                        `security-based swap' does not include any 
                        agreement, contract, or transaction that--
                                  ``(I) would otherwise be included as 
                                a `security-based swap' under 
                                subparagraph (A); and
                                  ``(II) is entered into by parties 
                                that report information or prepare 
                                financial statements on a consolidated 
                                basis, or for which an affiliated 
                                company reports information or prepares 
                                financial statements on a consolidated 
                                basis for both parties.
                          ``(ii) Reporting.--All agreements, contracts, 
                        or transactions described in clause (i) shall 
                        be reported to either a security-based swap 
                        data repository, or, if there is no security-
                        based swap data repository that would accept 
                        such security-based swaps, to the Commission 
                        pursuant to section 13A within such time period 
                        as the Commission may by rule or regulation 
                        prescribe.
                          ``(iii) Preservation of federal reserve act 
                        authority.--Nothing in this subparagraph shall 
                        exempt a transaction described in this 
                        subparagraph from sections 23A or 23B of the 
                        Federal Reserve Act or implementing regulations 
                        thereunder.
                          ``(iv) Protection of insurance funds.--
                        Nothing in this subparagraph shall be construed 
                        to prevent the regulator of a Federal or State 
                        insurance fund or guaranty fund from exercising 
                        its other existing authority to protect the 
                        integrity of such a fund, except that such 
                        regulator shall not subject security-based swap 
                        transactions between affiliated companies to 
                        clearing and execution requirements under 
                        section 3C, to any applicable margin and 
                        capital requirements of section 15F(e), or to 
                        reporting requirements other than those set 
                        forth in clause (ii).
                          ``(v) Prevention of evasion.--The Commission 
                        may prescribe rules under this subparagraph 
                        (and issue interpretations of rules prescribed 
                        under this subparagraph) as determined by the 
                        Commission to be necessary to include in the 
                        definition of security-based swap under this 
                        paragraph any agreement, contract, or 
                        transaction that has been structured as an 
                        affiliate transaction to evade the requirements 
                        of this Act applicable to security-based 
                        swaps.''.

                          Purpose and Summary

    Inter-affiliate swaps are swaps and security-based swaps 
executed between entities under common corporate ownership. 
H.R. 2779 exempts inter-affiliate swaps and security-based swap 
trades from many of the regulations in Title VII of the Dodd-
Frank Wall Street Reform and Consumer Protection Act (PL 111-
203) that are designed to mitigate risks associated with so-
called ``market-facing trades,'' where a corporation executes a 
derivatives transaction with an investment bank or other 
entity, which may be either a swap dealer or security-based 
swap dealer.
    Under H.R. 2779, inter-affiliate swap trades must still be 
reported to a swap data repository and to the appropriate 
regulators. While the bill does not exempt security-based swap 
trades from all of Title VII's requirements, the bill does 
exempt such transactions from the margin, capital, clearing and 
execution, and real-time reporting requirements of Title VII. 
The bill would also prohibit affiliate transactions from being 
used as a factor in defining a security-based swap dealer or 
major security-based swap participant.

                  Background and Need for Legislation

    Inter-affiliate swaps allow a company with subsidiaries and 
affiliates to better manage risk by transferring the risk of 
its affiliates to a single affiliate and then executing swaps 
through that affiliate. Inter-affiliate swaps do not pose a 
systemic risk because they do not create additional 
counterparty exposures or increase the interconnectedness 
between parties outside the corporate group. Currently, 
companies use inter-affiliate swaps to combine positions and 
centrally hedge risk. This is accomplished by executing most or 
all of its external swaps or security-based swaps through a 
single or limited number of affiliates.
    Despite the significant differences between inter-affiliate 
swaps and swaps between unrelated parties, the Dodd-Frank Act 
treats these swaps the same, which needlessly increases the 
cost of hedging risk for end-users.
    At an October 14, 2011, hearing of the Capital Markets and 
Government Sponsored Enterprises Subcommittee, Ms. Brenda 
Boultwood of Constellation Energy testified on behalf of the 
Coalition for Derivatives End-Users that:

          Constellation Energy, like many other companies, uses 
        a business model through which we limit the number of 
        affiliates within our corporation that enters into 
        derivatives transactions with external and other swap 
        dealer counterparties. Rather than having each 
        corporate subsidiary transact individually with 
        external counterparties, a single or limited number of 
        corporate entities face dealers and other 
        counterparties in the market. This helps our company 
        centralize risk taking, accountability and performance 
        management. These entities then allocate transactions 
        to those affiliates seeking to mitigate the underlying 
        risk. This allocation is done by way of 
        ``interaffiliate swaps''--or swaps between commonly 
        controlled entities. This structure allows us to more 
        effectively manage our corporate risk on an enterprise 
        basis and to secure better pricing on our derivatives 
        transactions. The transactions are largely 
        ``bookkeeping'' in nature and do not create systemic 
        risk. Using affiliates to transact has always been a 
        healthy part of the way many companies internally 
        centralize risk and manage overall performance.

    Further, Ms. Boultwood testified that H.R. 2779 ``would 
exempt a category of swaps, not a particular type of entity 
from regulation. That is precisely what the Administration did 
in exempting foreign exchange swaps and forwards and it is the 
right approach here as well.''

                                Hearings

    On October 14, 2011, the Subcommittee on Capital Markets 
and Government Sponsored Enterprises held a hearing entitled 
``Legislative Proposals to Bring Certainty to the Over-the-
Counter Derivatives Market,'' to consider H.R. 2779, and four 
other bills. The following witnesses testified:
           Mr. Keith Bailey, Managing Director, Fixed 
        Income, Currencies and Commodities, Barclays Capital, 
        on behalf of the Institute of International Bankers
           Mr. Shawn Bernardo, Senior Managing 
        Director, Tullett Prebon, on behalf of the Wholesale 
        Market Brokers' Association Americas
           Ms. Brenda Boultwood, Chief Risk Officer and 
        Senior Vice President, CE Risk Management Division 
        Office, Constellation Energy, on behalf of the 
        Coalition of Derivatives End-Users
           Mr. James Cawley, CEO, Javelin Capital 
        Markets LLC
           Mr. Kent Mason, Davis & Harman LLP, on 
        behalf of the American Benefits Council and the 
        Committee on the Investment of Employee Benefit Assets
           Mr. Conrad Voldstad, Chief Executive 
        Officer, International Swaps and Derivatives 
        Association

                        Committee Consideration

    The Subcommittee on Capital Markets and Government 
Sponsored Enterprises met in open session on November 15, 2011, 
and ordered H.R. 2779 favorably reported to the full Committee 
by a record vote of 23 yeas, 6 nays and 1 present (Record vote 
no. CM-42).
    The Committee on Financial Services met in open session on 
November 30, 2011, and ordered H.R. 2779, as amended, favorably 
reported to the House by a record vote of 53 yeas and 0 nays 
(Record vote no. FC-53).

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. A 
motion by Chairman Bachus to report the bill, as amended, to 
the House with a favorable recommendation was agreed to by a 
record vote of 53 yeas and 0 nays (Record vote no. FC-53). The 
names of Members voting for and against follow:

                                              RECORD VOTE NO. FC-53
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Bachus.....................        X   ........  .........  Mr. Frank (MA)...        X   ........  .........
Mr. Hensarling.................        X   ........  .........  Ms. Waters.......        X   ........  .........
Mr. King (NY)..................        X   ........  .........  Mrs. Maloney.....        X   ........  .........
Mr. Royce......................        X   ........  .........  Mr. Gutierrez....  ........  ........  .........
Mr. Lucas......................        X   ........  .........  Ms. Velazquez....  ........  ........  .........
Mr. Paul.......................  ........  ........  .........  Mr. Watt.........        X   ........  .........
Mr. Manzullo...................        X   ........  .........  Mr. Ackerman.....        X   ........  .........
Mr. Jones......................        X   ........  .........  Mr. Sherman......        X   ........  .........
Mrs. Biggert...................        X   ........  .........  Mr. Meeks........        X   ........  .........
Mr. Gary G. Miller (CA)........        X   ........  .........  Mr. Capuano......        X   ........  .........
Mrs. Capito....................        X   ........  .........  Mr. Hinojosa.....        X   ........  .........
Mr. Garrett....................        X   ........  .........  Mr. Clay.........        X   ........  .........
Mr. Neugebauer.................        X   ........  .........  Mrs. McCarthy            X   ........  .........
                                                                 (NY).
Mr. McHenry....................        X   ........  .........  Mr. Baca.........        X   ........  .........
Mr. Campbell...................        X   ........  .........  Mr. Lynch........        X   ........  .........
Mrs. Bachmann..................  ........  ........  .........  Mr. Miller (NC)..        X   ........  .........
Mr. McCotter...................        X   ........  .........  Mr. David Scott          X
                                                                 (GA).
Mr. McCarthy (CA)..............        X   ........  .........  Mr. Al Green (TX)  ........  ........  .........
Mr. Pearce.....................        X   ........  .........  Mr. Cleaver......        X   ........  .........
Mr. Posey......................        X   ........  .........  Ms. Moore........  ........  ........  .........
Mr. Fitzpatrick................        X   ........  .........  Mr. Ellison......        X   ........  .........
Mr. Westmoreland...............        X   ........  .........  Mr. Perlmutter...        X   ........  .........
Mr. Luetkemeyer................        X   ........  .........  Mr. Donnelly.....        X   ........  .........
Mr. Huizenga...................        X   ........  .........  Mr. Carson.......  ........  ........  .........
Mr. Duffy......................        X   ........  .........  Mr. Himes........        X   ........  .........
Ms. Hayworth...................        X   ........  .........  Mr. Peters.......        X   ........  .........
Mr. Renacci....................        X   ........  .........  Mr. Carney.......  ........  ........  .........
Mr. Hurt.......................        X
Mr. Dold.......................        X
Mr. Schweikert.................        X
Mr. Grimm......................        X
Mr. Canseco....................        X
Mr. Stivers....................        X
Mr. Fincher....................        X
----------------------------------------------------------------------------------------------------------------

    During the Committee consideration of H.R. 2779, the 
following amendment and motion were considered:
    1. An amendment offered by Ms. Moore and Mr. Stivers, no. 
1, to narrow the scope of the affiliate exemption, provide a 
new definition of ``affiliate,'' preserve the Federal Reserve 
Act's authority, protect insurance and guaranty funds, and 
allow the Securities and Exchange Commission (SEC) to prescribe 
rules to prevent evasion of the requirements of the Act, was 
agreed to by voice vote.
    2. A motion offered by Mr. Bachus to move the previous 
question on H.R. 2779 was agreed to by voice vote.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee has held hearings and 
made findings that are reflected in this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    The objective of H.R. 2779 is to exempt inter-affiliate 
swaps and security-based swap trades from the margin, clearing, 
and reporting requirements of the Dodd-Frank Act. Inter-
affiliate swaps are swaps and security-based swaps executed 
between entities under common corporate ownership. Inter-
affiliate swaps allow a company with subsidiaries and 
affiliates to better manage risk by transferring the risk of 
its affiliates to a single affiliate and then executing swaps 
through that affiliate. Inter-affiliate swaps do not pose a 
systemic risk because they do not create additional 
counterparty exposures or increase the interconnectedness 
between parties outside the corporate group. Currently, 
companies use inter-affiliate swaps to combine positions and 
centrally hedge risk. This is accomplished by executing most or 
all of its external swaps or security-based swap trades through 
a single or limited number of affiliates.

           New Budget Authority, Entitlement Authority, and 
                            Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                                 December 14, 2011.
Hon. Spencer Bachus,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2779, a bill to 
exempt inter-affiliate swaps from certain regulatory 
requirements put in place by the Dodd-Frank Wall Street Reform 
and Consumer Protection Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Susan Willie.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

H.R. 2779--A bill to exempt inter-affiliate swaps from certain 
        regulatory requirements put in place by the Dodd-Frank Wall 
        Street Reform and Consumer Protection Act

    The Dodd-Frank Wall Street Reform and Consumer Protection 
Act (Public Law 111-203) requires that participants in swap 
transactions meet certain clearing, reporting, and margin 
requirements as well as certain business conduct standards. (A 
swap is a contract that calls for an exchange of cash between 
two participants, based on an underlying rate or index or the 
performance of an asset). H.R. 2779 would exempt from the 
definition of a swap those transactions in which the parties 
are affiliates as defined in the bill; thus, affiliated parties 
that enter into swap transactions would be exempt from those 
clearing, reporting, margin and business conduct requirements.
    Neither the Commodity Futures Trading Commission nor the 
Securities and Exchange Commission (the agencies required to 
develop and enforce regulations related to swap transactions) 
has finalized regulations related to swap transactions. Based 
on information from the two agencies, CBO expects that 
incorporating the provisions of H.R. 2779 at this point in the 
regulatory process would not require a significant increase in 
the workload of either agency. Therefore, CBO estimates that 
any change in discretionary spending to implement the 
legislation, which would be subject to the availability of 
appropriated funds, would not be significant. Enacting H.R. 
2779 would not affect direct spending or revenues; therefore, 
pay-as-you-go procedures do not apply.
    H.R. 2779 would impose an intergovernmental mandate as 
defined in the Unfunded Mandates Reform Act (UMRA) by 
prohibiting state regulators from requiring insurance companies 
to report their holdings of inter-affiliate swaps on their 
annual statements. Because the limit on state authority would 
not require the expenditure of funds, CBO estimates that the 
bill would impose no costs on state, local, or tribal 
governments.
    The bill contains no private-sector mandates as defined in 
UMRA.
    The CBO staff contact for this estimate is Susan Willie. 
The estimate was approved by Theresa Gullo, Deputy Assistant 
Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of the section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    H.R. 2779 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

             Section-by-Section Analysis of the Legislation


Section 1. Treatment of affiliate transactions

    This section amends Section 1(a)(47) of the Commodity 
Exchange Act, as added by Section 721(a)(21) of the Dodd-Frank 
Act, by stating that the term ``swap'' is not considered a 
``swap'' as defined under Dodd-Frank so long as the transaction 
is between a party that is controlling, controlled by, or under 
common control with its counterparty. This section also 
requires that all swaps defined under the section shall be 
reported to a swap data repository, or if one does not exist, 
to the Commodity Futures Trading Commission within a time 
period to be prescribed by the Commission.
    This section also amends Section 3(a)(68) of the Securities 
Exchange Act of 1934, as added by Section 761(a)(6) of the 
Dodd-Frank Act, by stating that the term ``security-based 
swap'' is not considered a ``security-based swap'' for purposes 
of clearing and execution requirements; any applicable margin 
and capital requirements; defining a security-based swap dealer 
or a major security-based swap participant; and reporting 
requirements other than the requirement that all transactions 
be reported to a security-based swap data repository or to the 
Securities and Exchange Commission within a time period to be 
prescribed by the Commission.
    This section also preserves the power to regulate security-
based swap transactions under Sections 23A and 23B of the 
Federal Reserve Act. This section also provides for protection 
of federal and state regulators of insurance and guaranty funds 
to exercise their existing authority to protect the integrity 
of a fund, except that such regulator shall not have the 
ability to subject security-based swaps to clearing and 
execution requirements, any applicable margin and capital 
requirements, or any reporting requirements established under 
the Dodd-Frank Act other than the reporting requirements 
already set forth in this section. Additionally, this section 
allows the SEC to prescribe rules to govern security-based 
swaps to prevent transactions from being structured as an 
affiliate transaction for the purposes of avoiding regulation 
under the Dodd-Frank Act.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italic and existing law in which no change is 
proposed is shown in roman):

                         COMMODITY EXCHANGE ACT




           *       *       *       *       *       *       *
SEC. 1A. DEFINITIONS.

As used in this Act:
          (1) * * *

           *       *       *       *       *       *       *

          (47) Swap.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (G) Treatment of affiliate transactions.--
                          (i) In general.--The term ``swap'' 
                        does not include any agreement, 
                        contract, or transaction that--
                                  (I) would otherwise be 
                                included as a ``swap'' under 
                                subparagraph (A); and
                                  (II) is entered into by a 
                                party that is controlling, 
                                controlled by, or under common 
                                control with its counterparty.
                          (ii) Reporting.--All agreements, 
                        contracts, or transactions described in 
                        clause (i) shall be reported to either 
                        a swap data repository, or, if there is 
                        no swap data repository that would 
                        accept such swaps, to the Commission 
                        pursuant to section 4r within such time 
                        period as the Commission may by rule or 
                        regulation prescribe.

           *       *       *       *       *       *       *

                              ----------                              


                    SECURITIES EXCHANGE ACT OF 1934

TITLE I--REGULATION OF SECURITIES EXCHANGES

           *       *       *       *       *       *       *


                  DEFINITIONS AND APPLICATION OF TITLE

  Sec. 3. (a) When used in this title, unless the context 
otherwise requires--
          (1) * * *

           *       *       *       *       *       *       *

          (68) Security-based swap.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (F) Treatment of affiliate transactions.--
                          (i) In general.--For the purposes of 
                        any clearing and execution requirements 
                        under sections 3C and any applicable 
                        margin and capital requirements of 
                        section 15F(e), and for purposes of 
                        defining a security-based swap dealer 
                        or a major security-based swap 
                        participant, and reporting requirements 
                        other than those set forth in clause 
                        (ii), the term ``security-based swap'' 
                        does not include any agreement, 
                        contract, or transaction that--
                                  (I) would otherwise be 
                                included as a ``security-based 
                                swap'' under subparagraph (A); 
                                and
                                  (II) is entered into by 
                                parties that report information 
                                or prepare financial statements 
                                on a consolidated basis, or for 
                                which an affiliated company 
                                reports information or prepares 
                                financial statements on a 
                                consolidated basis for both 
                                parties.
                          (ii) Reporting.--All agreements, 
                        contracts, or transactions described in 
                        clause (i) shall be reported to either 
                        a security-based swap data repository, 
                        or, if there is no security-based swap 
                        data repository that would accept such 
                        security-based swaps, to the Commission 
                        pursuant to section 13A within such 
                        time period as the Commission may by 
                        rule or regulation prescribe.
                          (iii) Preservation of federal reserve 
                        act authority.--Nothing in this 
                        subparagraph shall exempt a transaction 
                        described in this subparagraph from 
                        sections 23A or 23B of the Federal 
                        Reserve Act or implementing regulations 
                        thereunder.
                          (iv) Protection of insurance funds.--
                        Nothing in this subparagraph shall be 
                        construed to prevent the regulator of a 
                        Federal or State insurance fund or 
                        guaranty fund from exercising its other 
                        existing authority to protect the 
                        integrity of such a fund, except that 
                        such regulator shall not subject 
                        security-based swap transactions 
                        between affiliated companies to 
                        clearing and execution requirements 
                        under section 3C, to any applicable 
                        margin and capital requirements of 
                        section 15F(e), or to reporting 
                        requirements other than those set forth 
                        in clause (ii).
                          (v) Prevention of evasion.--The 
                        Commission may prescribe rules under 
                        this subparagraph (and issue 
                        interpretations of rules prescribed 
                        under this subparagraph) as determined 
                        by the Commission to be necessary to 
                        include in the definition of security-
                        based swap under this paragraph any 
                        agreement, contract, or transaction 
                        that has been structured as an 
                        affiliate transaction to evade the 
                        requirements of this Act applicable to 
                        security-based swaps.

           *       *       *       *       *       *       *


                                  
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