53162 Federal Register / Vol. 76, No. 165 / Thursday, August 25, 2011 / Notices 

1 17 CFR 145.9. 

2See Dodd-Frank Wall Street Reform and 

Consumer Protection Act, Pub. L. 111–203, 124 

Stat. 1376 (2010). The text of the Dodd-Frank Act 

is available at http://frwebgate.access.gpo.gov/cgibin/getdoc.cgi?dbname=111_cong_bills&docid=f:

h4173enr.txt.pdf. 

3The term ‘‘swap’’ is defined in Commodity 

Exchange Act (‘‘CEA’’) section 1a(47), 7 U.S.C. 

1a(47). The term ‘‘security-based swap’’ is defined 

as an agreement, contract, or transaction that is a 

‘‘swap’’ (without regard to the exclusion from that 

definition for security-based swaps) and that also 

has certain characteristics specified in the DoddFrank Act. See section 3(a)(68) of the Securities 

Exchange Act of 1934, 15 U.S.C. 78c(a)(68). Thus, 

a determination regarding whether SVCs fall within 

the definition of a swap also is relevant to a 

determination of whether SVCs fall within the 

definition of the term ‘‘security-based swap.’’ These 

terms are the subject of further definition in joint 

proposed rulemaking by the Commissions. See 

Further Definition of ‘‘Swap,’’ ‘‘Security-Based 

Swap,’’ and ‘‘Security-Based Swap Agreement’’; 

Mixed Swaps; Security-Based Swap Agreement 

Recordkeeping, File No. S7–16–11, 76 FR 29818 

4. The Secretary shall arrange for 

publication of this order in the Federal 

Register. 

By the Commission. 

Shoshana M. Grove, 

Secretary. 

[FR Doc. 2011–21690 Filed 8–24–11; 8:45 am] 

BILLING CODE 7710–FW–P 

COMMODITY FUTURES TRADING 

COMMISSION 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–65153; File No. S7–32–11] 

Acceptance of Public Submissions 

Regarding the Study of Stable Value 

Contracts 

AGENCY: Commodity Futures Trading 

Commission; Securities and Exchange 

Commission. 

ACTION: Request for comment. 

SUMMARY: The Dodd-Frank Wall Street 

Reform and Consumer Protection Act 

(the ‘‘Dodd-Frank Act’’) was enacted on 

July 21, 2010. Section 719(d) of the 

Dodd-Frank Act mandates that the 

Commodity Futures Trading 

Commission (the ‘‘CFTC’’) and the 

Securities and Exchange Commission 

(the ‘‘SEC’’ and, together with the CFTC, 

the ‘‘Commissions’’) jointly conduct a 

study to determine whether stable value 

contracts (‘‘SVCs’’) fall within the 

definition of a swap. Section 719(d) of 

the Dodd-Frank Act also requires that 

the Commissions, in making that 

determination, jointly consult with the 

Department of Labor, the Department of 

the Treasury, and the State entities that 

regulate the issuers of SVCs. Further, 

Section 719(d) of the Dodd-Frank Act 

provides that if the Commissions 

determine that SVCs fall within the 

definition of a swap, they jointly shall 

determine if an exemption for SVCs 

from the definition of a swap is 

appropriate and in the public interest. 

In connection with this study, the 

Commissions’ staffs seek responses of 

interested parties to the questions set 

forth below. 

DATES: Please submit comments in 

writing on or before September 26, 

2011. 

ADDRESSES: Comments may be 

submitted by any of the following 

methods: 

CFTC 

• Agency Web site, via its Comments 

Online process: http://comments. 

cftc.gov. Follow the instructions for 

submitting comments through the Web 

site. 

• Mail: David A. Stawick, Secretary, 

Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street, NW., Washington, DC 

20581. 

• Hand Delivery/Courier: Same as 

mail above. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

Please submit your comments using 

only one method. ‘‘Stable Value 

Contract Study’’ must be in the subject 

field of responses submitted via e-mail, 

and clearly indicated on written 

submissions. All comments must be 

submitted in English, or if not, 

accompanied by an English translation. 

Comments will be posted as received to 

http:// 

www.cftc.gov. You should submit only 

information that you wish to make 

available publicly. If you wish the CFTC 

to consider information that you believe 

is exempt from disclosure under the 

Freedom of Information Act, a petition 

for confidential treatment of the exempt 

information may be submitted according 

to the procedures established in section 

145.9 of the CFTC’s regulations.1

The CFTC reserves the right, but shall 

have no obligation, to review, prescreen, filter, redact, refuse, or remove 

any or all of your submission from 

http://www.cftc.gov that it may deem to 

be inappropriate for publication, 

including obscene language. All 

submissions that have been redacted or 

removed that contain comments on the 

merits of the rulemaking will be 

retained in the public comment file and 

will be considered as required under 

applicable laws, and may be accessible 

under the Freedom of Information Act. 

SEC 

Electronic Comments 

Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/other.shtml); 

Send an e-mail to rule-comments@ 

sec.gov. Please include File Number S7– 

32–11 on the subject line; or 

Use the Federal eRulemaking Portal 

(http://www.regulations.gov). Follow the 

instructions for submitting comments. 

Paper Comments 

Send paper comments in triplicate to 

Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. All submissions should 

refer to File Number S7–32–11. This file 

number should be included on the 

subject line if e-mail is used. To help us 

process and review your comments 

more efficiently, please use only one 

method. The SEC will post all 

comments on the SEC’s Internet Web 

site (http://www.sec.gov/rules/ 

other.shtml). Comments are also 

available for Web site viewing and 

printing in the SEC’s Public Reference 

Room, 100 F Street, NE., Washington, 

DC 20549, on official business days 

between the hours of 10 a.m. and 3 p.m. 

All comments received will be posted 

without change; the SEC does not edit 

personal identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. 

FOR FURTHER INFORMATION CONTACT: 

CFTC: Stephen A. Kane, Consultant, 

Office of the Chief Economist, (202) 

418–5911, skane@cftc.gov; or David E. 

Aron, Counsel, Office of the General 

Counsel, (202) 418–6621, 

daron@cftc.gov, Commodity Futures 

Trading Commission, Three Lafayette 

Centre, 1155 21st Street, NW., 

Washington, DC 20581; SEC: Matthew 

A. Daigler, Senior Special Counsel, 

(202) 551–5500, Donna Chambers, 

Special Counsel, (202) 551–5500, or 

Leah Drennan, Attorney-Adviser, (202) 

551–5500, Division of Trading and 

Markets, Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549. 

SUPPLEMENTARY INFORMATION: On July 

21, 2010, President Obama signed the 

Dodd-Frank Act into law.2 Pursuant to 

section 719(d)(1)(A) of the Dodd-Frank 

Act, the Commissions jointly must 

conduct a study, not later than 15 

months after the date of enactment of 

the Dodd-Frank Act, to determine 

whether SVCs fall within the definition 

of a swap.3 Section 719(d)(1)(A) of the 


srobinson on DSK4SPTVN1PROD with NOTICES
Federal Register / Vol. 76, No. 165 / Thursday, August 25, 2011 / Notices 53163 

(May 23, 2011) (‘‘Product Definitions Proposing 

Release’’). Citations herein to provisions of the 

Commodity Exchange Act and the Securities 

Exchange Act of 1934 refer to the numbering of 

those provisions after the effective date of Title VII. 4See section 719(d)(1)(B) of the Dodd-Frank Act. 

Pursuant to section 719(d)(1)(B) of the Dodd-Frank 

Act, ‘‘The Commissions shall issue regulations 

implementing the determinations required under 

this paragraph.’’ 5See section 719(d)(1)(C) of the Dodd-Frank Act. 6The Commissions understand that a bank, 

insurance company, or other state or federally 

regulated financial institution that offers an SVC is 

commonly referred to as an ‘‘SVC provider.’’ 7See, e.g., U.S. Government Accountability 

Office, 401(K) Plans: Certain Investment Options 

and Practices That May Restrict Withdrawals Not 

Widely Understood, at 10–11, GAO–11–234 

(Washington, DC: Mar. 10, 2011); Proposed 

Exemptions From Certain Prohibited Transaction 

Restrictions, Department of Labor, 75 FR 61932, 

61938 (Oct. 6, 2010). 

8See 401(K) Plans: Certain Investment Options 

and Practices That May Restrict Withdrawals Not 

Widely Understood, supra note 7, at 11. In the 

context of an SVC, the staffs understand, based on 

conversations with market participants, that the 

term ‘‘book value’’ means investment principal plus 

interest accrued using the crediting rate formula 

determined for the SVF and set forth in the SVC. 

9See supra note 3. The Commissions note that 

any comment submitted in response to this 

question will be taken into consideration by the 

Commissions as they consider any final action on 

the Product Definitions Proposing Release. 

Dodd-Frank Act also requires the 

Commissions, in making such 

determination, jointly to consult with 

the Department of Labor, the 

Department of the Treasury, and the 

State entities that regulate the issuers of 

SVCs. 

If the Commissions determine that 

SVCs fall within the definition of a 

swap, they jointly must determine if an 

exemption for SVCs from the definition 

of a swap is appropriate and in the 

public interest.4 Until the effective date 

of any regulations enacted pursuant to 

Section 719(d) of the Dodd-Frank Act, 

and notwithstanding any other 

provision of Title VII of the Dodd-Frank 

Act, the Title VII requirements will not 

apply to SVCs.5

Section 719(d)(2) of the Dodd-Frank 

Act defines a ‘‘stable value contract’’ as: 

any contract, agreement, or transaction that 

provides a crediting interest rate and 

guaranty or financial assurance of liquidity at 

contract or book value prior to maturity 

offered by a bank, insurance company, or 

other State or federally regulated financial 

institution for the benefit of any individual 

or commingled fund available as an 

investment in an employee benefit plan (as 

defined in section 3(3) of the Employee 

Retirement Income Security Act of 1974, 

including plans described in section 3(32) of 

such Act) subject to participant direction, an 

eligible deferred compensation plan (as 

defined in section 457(b) of the Internal 

Revenue Code of 1986) that is maintained by 

an eligible employer described in section 

457(e)(1)(A) of such Code, an arrangement 

described in section 403(b) of such Code, or 

a qualified tuition program (as defined in 

section 529 of such Code).6

The Commissions’ staffs understand 

that stable value funds (‘‘SVFs’’) are a 

type of investment commonly offered 

through 401(k) and other defined 

contribution plans with the objective of 

providing preservation of principal, 

liquidity, and current income at levels 

that are typically higher than those 

provided by money market funds.7 The 

Commissions’ staffs further understand 

that SVCs are components of SVFs that 

SVF sponsors or managers purchase 

from SVC providers, including banks 

and insurers, that provide a guarantee, 

or ‘‘wrap,’’ by the service provider to 

pay plan participants at ‘‘book value’’ 

should the market value of the SVF be 

worth less than the amount needed to 

pay that book value.8 In furtherance of 

this SVC study, the Commissions’ staffs 

seek responses to the any or all of the 

questions below. Commenters are 

encouraged to provide additional 

relevant information, including 

empirical evidence where appropriate 

and to the extent feasible, beyond that 

called for by these questions. 

Swap Definitional and Exemptive Issues 

1. Do SVCs possess characteristics 

that would cause them to fall within the 

definition of a swap? If so, please 

describe those characteristics. 

2. What characteristics, if any, 

distinguish SVCs from swaps? 

3. Does the definition of the term 

‘‘stable value contract’’ in Section 

719(d)(2) of the Dodd-Frank Act 

encompass all of the products 

commonly known as SVCs? 

4. Are the proposed rules and the 

interpretive guidance set forth in the 

Product Definitions Proposing Release 9

useful, appropriate, and sufficient for 

persons to consider when evaluating 

whether SVCs fall within the definition 

of a swap? If not, why not? Would SVCs 

satisfy the test for insurance provided in 

the Product Definitions Proposing 

Release? Why or why not? Is additional 

guidance necessary with regard to SVCs 

in this context? If so, what further 

guidance would be appropriate? Please 

explain. 

5. If the Commissions were to 

determine that SVCs fall within the 

definition of a swap, what would be 

their underlying reference asset? 

6. If the Commissions were to 

determine that SVCs fall within the 

definition of a swap, what facts and 

considerations, policy and otherwise, 

would support exempting SVCs from 

the definition of a swap? What facts and 

considerations, policy and otherwise, 

would not support exempting SVCs 

from the definition of a swap? 

7. If the Commissions were to (a) 

Determine that SVCs fall within the 

definition of a swap but provide an 

exemption from the definition of a 

swap, (b) determine that SVCs fall 

within the definition of a swap and not 

provide an exemption from such 

definition, or (c) determine that such 

contracts are not swaps, what beneficial 

or adverse regulatory or legal 

consequences, if any, could result? For 

example, could any of such 

determinations lead to beneficial or 

adverse treatment under the Employee 

Retirement Income Security Act 

(‘‘ERISA’’), bankruptcy law, tax law, or 

accounting standards, as compared to 

the regulatory regimes applicable to 

SVCs, in the event that the Commissions 

were to determine that SVCs are not 

swaps or grant an exemption from the 

definition of a swap? 

Market and Product Structure Issues 

8. What are the different types of 

SVCs, how are they structured, and 

what are their uses? Please describe in 

detail. 

9. Please describe the operation of 

SVCs and SVFs generally in terms of 

contract structure, common contract 

features, investments, market structure, 

SVC providers, regulatory oversight, 

investor protection, benefits and 

drawbacks, risks inherent in SVCs, and 

any other information that commenters 

believe the Commissions should be 

aware of in connection with the SVC 

study. 

10. What provisions of SVCs, if any, 

allow SVC providers to terminate SVCs 

that prevent benefit plan investors from 

transacting at book value? What are the 

trade-offs, including the costs and 

benefits of such provisions? Please 

describe in detail. 

11. Describe the benefits and risks of 

SVCs for SVC providers. How do SVC 

providers mitigate those risks? Please 

provide detailed descriptions. How 

effective are any such measures? 

12. Describe the benefits and risks of 

SVCs for investors in SVFs. Please 

provide detailed descriptions. 

13. The Commissions’ staffs 

understand that SVC providers 

sometimes negotiate so-called 

‘‘immunization’’ provisions with SVF 

managers and that such provisions 

typically allow SVC providers (or SVF 

managers) to terminate the SVCs based 

upon negotiated triggers, which can 

include underperformance of the 

portfolio against a benchmark. The 

Commissions’ staffs also understand 

that, once immunization provisions 

have been triggered and are in effect, the 


srobinson on DSK4SPTVN1PROD with NOTICES
53164 Federal Register / Vol. 76, No. 165 / Thursday, August 25, 2011 / Notices 

SVF must be managed according to the 

immunization guidelines, which 

typically require the liquidation of all 

securities rated below AAA and in 

certain cases may require the portfolio 

to be invested 100% in Treasury 

securities. What risks, if any, do 

‘‘immunization’’ provisions in SVCs 

pose to investors in SVFs? If 

immunization provisions in SVCs pose 

risks to investors in SVFs, are these 

risks clearly disclosed to investors? Are 

these risks required to be disclosed to 

investors? What are the sources of such 

requirements? How do SVF managers or 

SVC providers address the risk that 

immunization will be exercised? How 

effective are any such measures? 

14. The Commissions’ staffs 

understand that some SVCs grant SVC 

providers the right to limit coverage of 

employer-driven events or employee 

benefit plan changes. Such events or 

changes could cause a decrease in a 

SVF’s value and result in large scale 

investor withdrawals or redemptions 

(sometimes called a ‘‘run on the fund’’). 

How do SVC providers and SVF 

managers manage this risk, if at all? 

How effective are any such measures? 

15. The Commissions’ staffs 

understand that SVF managers infuse 

capital into their funds in certain 

instances. Please describe the 

circumstances under which an SVF 

fund manager would provide such 

capital support for its fund. 

16. The Commissions’ staffs 

understand that ‘‘pull to par’’ provisions 

of SVCs provide that SVCs will not 

terminate (absent the application of 

another contract termination provision) 

until the gap between the market value 

of the wrapped assets and the SVC book 

value is closed, however long that takes. 

The Commissions’ staffs also 

understand that pull to par provisions 

are standard for SVCs. Are these 

understandings correct? Please describe 

pull to par provisions and how 

prevalent such provisions are in SVCs. 

17. How have SVFs and SVCs been 

affected by the recent financial crisis? 

How many SVC providers are in the 

market today? Is the number of SVC 

providers higher or lower than prior to 

the financial crisis that began in 2008? 

Are fees now higher or lower than prior 

to the financial crisis? 

18. Do investors have incentives to 

make a run on a SVF when its marketto-book ratio is substantially below one? 

What protections, if any, do SVCs 

provide to protect fund investors who 

do not redeem their fund shares amid a 

run on the fund? How effective are any 

such protections? 

19. How do market risk measures 

assess the risk of a run on a SVF? To the 

extent that SVC providers use value-atrisk (‘‘VaR’’) models, do such VaR 

models adequately assess the risk of loss 

resulting from such events or other 

possible but extremely unlikely events? 

Do other loss models more adequately 

assess the risk of loss, such as the 

expected value of a loss or the expected 

value given a loss, which employs the 

entire loss probability distribution 

without excluding events in the extreme 

tail of the loss distribution? 

20. Are certain SVC providers more 

likely, as a result of credit cyclicality, to 

become financially distressed? If so, is 

such financial distress likely to occur 

concurrently with financial distress of 

SVFs? If so, can the risk of such 

concurrent financial distress be 

mitigated? How effective are any such 

measures? 

21. Do SVC providers pose systemic 

risk concerns? Are there concerns with 

entities that may be systemically 

important institutions providing SVCs? 

What are the consequences for SVFs, 

employee benefit/retirement plans, and 

the financial system should an SVC 

provider fail? 

22. Are there issues specific to 

financial institutions providing SVCs, 

including institutions that are 

systemically significant, that the 

Commissions should consider in 

connection with the SVC study? If so, 

please describe. 

Regulatory Issues 

23. What disclosures to benefit plan 

investors in SVFs currently are required, 

and what are the sources of such 

requirements? What additional 

disclosure typically is provided, either 

voluntarily or on request? What 

additional disclosure, if any, would be 

warranted and why would it be 

warranted? Please explain in detail. 

24. What financial and regulatory 

protections currently exist that are 

designed to ensure that SVC providers 

can meet their obligations to investors, 

and what are the sources of such 

protections? Does the level of protection 

vary depending on the SVC provider? 

How effective are any such measures? 

25. Currently, do entities other than 

state-regulated insurance companies 

and federally- or state-regulated banks 

provide SVCs? If so, what kinds of 

entities do so and how are they 

regulated? If not, are there any barriers 

to the provision of SVCs by entities 

other than state-regulated insurance 

companies and federally- or stateregulated banks? 

26. What role do SVF managers play 

in protecting the interests of plan 

participants with respect to SVFs? How 

effective are any such measures? 

Compliance Issues if the Commissions 

Were To Determine SVCs Were Swaps 

27. If the Commissions were to 

determine that SVCs fall within the 

definition of a swap and should not be 

exempted from such definition, should 

the regulatory regime for SVCs be 

limited or tailored in any way? If so, 

how? Please explain in detail. Should 

any of the requirements for capital and 

margin for SVCs differ from those for 

swaps that are not SVCs? Why or why 

not? If the requirements for capital and 

margin should differ, please explain in 

detail what those differences should be. 

28. If the Commissions were to 

determine that SVCs fall within the 

definition of a swap and should not be 

exempted from such definition, would 

the requirements of any regulatory 

regime for swaps impact fee structures 

or fees charged by SVC providers? 

Please describe (quantitatively, if 

possible) the relationship of any new 

federal regulation under the Dodd-Frank 

Act to possible changes in fee structures 

or fees, to the extent feasible, and state 

any assumptions used in quantifying 

such relationship. 

29. If the Commissions were to 

determine that SVCs fall within the 

definition of a swap and should not be 

exempted from such definition, would 

this decision influence the availability 

of SVFs to investors? Would this 

designation affect existing SVFs and the 

ability of SVFs to purchase SVCs? If so, 

how and why? 

Dated: August 18, 2011. 

By the Commodity Futures Trading 

Commission. 

David A. Stawick, 

Secretary. 

Dated: August 18, 2011. 

By the Securities and Exchange 

Commission. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–21645 Filed 8–24–11; 8:45 am] 

BILLING CODE P 

SECURITIES AND EXCHANGE 

COMMISSION 

[File No. 500–1] 

Puda Coal, Inc.; Order of Suspension 

of Trading 

August 19, 2011. 

It appears to the Securities and 

Exchange Commission that there is a 

lack of current and accurate information 

concerning the securities of Puda Coal, 

Inc. (‘‘Puda’’) because (1) Puda’s 

auditors resigned on July 7, 2011 and 

stated that further reliance should no 


srobinson on DSK4SPTVN1PROD with NOTICES