§ 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.