I 

111TH CONGRESS 

1ST SESSION H. R. 3145 

To amend the securities laws to prohibit credit default swaps and to provide 

the Securities and Exchange Commission with the authority to regulate 

swap agreements. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 9, 2009 

Ms. WATERS introduced the following bill; which was referred to the 

Committee on Financial Services 

A BILL 

To amend the securities laws to prohibit credit default swaps 

and to provide the Securities and Exchange Commission 

with the authority to regulate swap agreements. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Credit Default Swap 

5 Prohibition Act of 2009’’. 

6 SEC. 2. FINDINGS AND PURPOSE. 

7 (a) FINDINGS.—The Congress finds the following: 


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1 (1) Credit default swaps were conceived as in2 surance instruments, used to diffuse risk and in3 crease liquidity throughout our lending system. 

4 (2) The credit default swap market has grown 

5 over the past decade to include contracts that are 

6 entered into by persons with no economic interest in 

7 the contract’s underlying reference event, also known 

8 as naked credit default swaps. 

9 (3) Certain parties wrote credit default swap 

10 contracts without posting collateral, leaving them 

11 overexposed to certain asset classes and creating a 

12 systemic risk. 

13 (4) Unconnected and uncollateralized specula14 tion creates an unnecessary risk for our financial 

15 system. 

16 (5) Credit default swaps have proved to be 

17 harmful financial instruments and have caused sig18 nificant wealth destruction during our economic cri19 sis. 

20 (b) PURPOSE.—The purposes of this Act are— 

21 (1) to allow the Securities and Exchange Com22 mission to have oversight over all security-based 

23 swap agreements; and 

24 (2) to prevent further damage to our economy 

25 by prohibiting credit default swaps. 


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1 SEC. 3. ESTABLISHING SECURITIES AND EXCHANGE COM2 MISSION OVERSIGHT OF CREDIT DEFAULT 

3 SWAPS. 

4 (a) DEFINITION OF CREDIT DEFAULT SWAP.— 

5 (1) Section 2(a) of the Securities Act of 1933 

6 (15 U.S.C. 77b(a)) is amended by adding at the end 

7 the following: 

8 ‘‘(17) CREDIT DEFAULT SWAP.—The term 

9 ‘credit default swap’ means— 

10 ‘‘(A) a swap agreement (as such term is 

11 defined in section 206A of the Gramm-Leach12 Bliley Act) that protects a party to such agree13 ment against the risk of a loss of value because 

14 of the occurrence or non-occurrence of an event 

15 or contingency specified in such agreement re16 lating to a security, loan, or other reference 

17 asset; and 

18 ‘‘(B) such other forms of credit risk pro19 tection as the Commission may, by rule, pre20 scribe as necessary or appropriate in the public 

21 interest or for the protection of investors.’’. 

22 (2) Section 3(a) of the Securities Exchange Act 

23 of 1934 (15 U.S.C. 78c(a)) is amended by adding at 

24 the end the following: 

25 ‘‘(65) CREDIT DEFAULT SWAP.—The term 

26 ‘credit default swap’ means— 


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1 ‘‘(A) a swap agreement (as such term is 

2 defined in section 206A of the Gramm-Leach3 Bliley Act) that protects a party to such agree4 ment against the risk of a loss of value because 

5 of the occurrence or non-occurrence of an event 

6 or contingency specified in such agreement re7 lating to a security, loan, or other reference 

8 asset; and 

9 ‘‘(B) such other forms of credit risk pro10 tection as the Commission may, by rule, pre11 scribe as necessary or appropriate in the public 

12 interest or for the protection of investors.’’. 

13 (b) SECURITIES ACT JURISDICTION OVER SWAPS.— 

14 Section 2A(b) of the Securities Act of 1933 (15 U.S.C. 

15 77b–1(b)) is amended— 

16 (1) in paragraph (1), by striking ‘‘does not’’ 

17 and inserting ‘‘shall’’; 

18 (2) by amending paragraph (2) to read as fol19 lows: 

20 ‘‘(2) The Commission may require the registra21 tion of any security-based swap agreement under 

22 this title.’’; and 

23 (3) by amending paragraph (3) to read as fol24 lows: 


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1 ‘‘(3) The Commission may promulgate rules, in2 terpret rules, enforce rules, and issue orders of gen3 eral applicability under this title in a manner that 

4 imposes or specifies reporting or recordkeeping re5 quirements, procedures, or standards as prophylactic 

6 measures against fraud, manipulation, or insider 

7 trading with respect to any security-based swap 

8 agreement.’’. 

9 (c) SECURITIES EXCHANGE ACT JURISDICTION

10 OVER SWAPS.—Section 3A(b) of the Securities Exchange 

11 Act of 1934 (15 U.S.C. 78c–1(b)) is amended— 

12 (1) in paragraph (1), by striking ‘‘does not’’ 

13 and inserting ‘‘shall’’; 

14 (2) by amending paragraph (2) to read as fol15 lows: 

16 ‘‘(2) The Commission may require registration 

17 of any security-based swap agreement under this 

18 title.’’; and 

19 (3) by amending paragraph (3) to read as fol20 lows: 

21 ‘‘(3) The Commission may promulgate rules, in22 terpret rules, enforce rules, and issue orders of gen23 eral applicability under this title in a manner that 

24 imposes or specifies reporting or recordkeeping re25 quirements, procedures, or standards as prophylactic 


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1 measures against fraud, manipulation, or insider 

2 trading with respect to any security-based swap 

3 agreement.’’. 

4 (d) TECHNICAL AND CONFORMING AMENDMENT.— 

5 (1) Section 17 of the Securities Act of 1933 (15 

6 U.S.C. 77q) is amended by striking subsection (d). 

7 (2) Section 9 of the Securities Exchange Act of 

8 1934 (15 U.S.C. 78i) is amended by striking sub9 section (i). 

10 (3) Section 15 of the Securities Exchange Act 

11 of 1934 (15 U.S.C. 78o) is amended by striking sub12 section (i) (as added by section 303(f) of the Com13 modity Futures Modernization Act of 2000). 

14 (4) Section 16 of the Securities Exchange Act 

15 of 1934 (15 U.S.C. 78p) is amended by striking 

16 subsection (g). 

17 (5) Section 20 of the Securities Exchange Act 

18 of 1934 (15 U.S.C. 78t) is amended by striking sub19 section (f). 

20 (6) Section 21A of the Securities Exchange Act 

21 of 1934 (15 U.S.C. 78u–1) is amended by striking 

22 subsection (g). 


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1 SEC. 4. PROHIBITION ON CREDIT DEFAULT SWAPS. 

2 The Securities Exchange Act of 1934 is amended by 

3 inserting after section 7 (15 U.S.C. 78g) the following new 

4 section: 

5 ‘‘SEC. 7A. PROHIBITION ON CREDIT DEFAULT SWAPS. 

6 ‘‘It shall be unlawful for any person to enter into a 

7 credit default swap agreement or contract.’’. 

8 SEC. 5. EFFECTIVE DATE. 

9 This Act and the amendments made by this Act shall 

10 take effect with respect to swap agreements (as such term 

11 is defined in section 206A of the Gramm-Leach-Bliley 

12 Act) and credit default swaps (as such term is defined in 

13 section 3(a)(65) of the Securities Exchange Act of 1934 

14 (15 U.S.C. 78c(a)(65))) entered into after the end of the 

15 180-day period beginning on the date of the enactment 

16 of this Act. 

Æ 


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