Editorial Note on Part 240
Editorial Note: Nomenclature changes to part 240 appear at 57 FR 36501, Aug. 13, 1992, and 57 FR 47409, Oct. 16, 1992.

§ 240.15fh-4 (Rule 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. ( a ) *Antifraud provisions.* It shall be unlawful for a security-based swap dealer or major security-based swap participant: ( 1 ) To employ any device, scheme, or artifice to defraud any special entity or prospective customer who is a special entity;
( 2 ) To engage in any transaction, practice, or course of business that operates as a fraud or deceit on any special entity or prospective customer who is a special entity; or
( 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: ( i ) The authority of the special entity to enter into a security-based swap;
( 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;
( v ) The experience of the special entity with respect to entering into security-based swaps, generally, and security-based swaps of the type and complexity being recommended;
( vi ) Whether the special entity has the financial capability to withstand changes in market conditions during the term of the security-based swap; and
( 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: ( i ) The transaction is executed on a registered or exempt security-based swap execution facility or registered national securities exchange; and
( 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.
( c ) *No undue influence over chief compliance officer.* It shall be unlawful for any officer, director, supervised person, or employee of a security-based swap dealer or major security-based swap participant, or any person acting under such person's direction, to directly or indirectly take any action to coerce, manipulate, mislead, or fraudulently influence the security-based swap dealer's or major security-based swap participant's chief compliance officer in the performance of their duties under the Federal securities laws or the rules and regulations thereunder.
[81 FR 30144, May 13, 2016, as amended at 88 FR 42585, June 30, 2023]