Document ID: SEC-2017-0993-0001
Agency: sec
Document Type: Notice
Title: Commission Statement Concerning Request for Interpretation as to Whether Particular Agreement is Swap, Security-Based Swap, or Mixed Swap
Posted Date: 2017-06-13T04:00Z

[Federal Register Volume 82, Number 112 (Tuesday, June 13, 2017)]
[Notices]
[Page 27091]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-12140]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80870]

Commission Statement Concerning a Request for an Interpretation 
as to Whether a Particular Agreement Is a Swap, Security-Based Swap, or 
Mixed Swap

AGENCY: Securities and Exchange Commission.

ACTION: Commission statement.

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SUMMARY: The Securities and Exchange Commission (the ``Commission'') is 
publishing this statement concerning a request for an interpretation as 
to whether a particular agreement is a swap, security-based swap, or 
mixed swap.

FOR FURTHER INFORMATION CONTACT: Andrew Bernstein, Senior Special 
Counsel, Office of Derivatives Policy, Division of Trading and Markets, 
at (202) 551-5870, or Andrew Schoeffler, Special Counsel, Office of 
Capital Markets Trends, Division of Corporation Finance, at (202) 551-
3860; U.S. Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549.

Statement

    This statement pertains to a letter that Commission staff received 
from Breakaway Courier Corporation (``Breakaway''), through its 
counsel, requesting a joint interpretation from the Commission and the 
Commodity Futures Trading Commission (``CFTC'') pursuant to Rule 3a68-2 
under the Securities Exchange Act of 1934 (``Exchange Act'') as to 
whether a particular agreement, contract, or transaction (or class 
thereof) is a swap, security-based swap, or mixed swap.\1\ Breakaway's 
request relates to a contract labeled as a Reinsurance Participation 
Agreement (``RPA''), which it has previously executed with Applied 
Underwriters Captive Risk Assurance Company, Inc. (``AUCRA'').\2\ 
According to Breakaway's submission, it entered into two RPAs with 
AUCRA, one of which has a stated effective date of July 1, 2009, and 
the other of July 1, 2012.
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    \1\ See 17 CFR 240.3a68-2. The letter specifically refers to the 
corresponding rule for the CFTC's process, Rule 1.8 under the 
Commodity Exchange Act (``CEA''). 17 CFR 1.8.
    \2\ A copy of Breakaway's submission may be found at: https://www.sec.gov/rules/other/2017/2017-331-tm-exhibit.pdf.
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    The Commission and the CFTC jointly adopted Exchange Act Rule 3a68-
2 and CEA Rule 1.8 in 2012 \3\ pursuant to Section 712(d)(4) of the 
Dodd-Frank Wall Street Reform and Consumer Protection Act (``Dodd-Frank 
Act'').\4\ The rules established a process for parties to request a 
joint interpretation as to whether a particular agreement, contract, or 
transaction (or class thereof) is a swap, security-based swap, or a 
mixed swap. Among other things, the rules set forth the information 
required to be included in a request and a process for withdrawing a 
request. Rule 3a68-2 also includes requirements governing the manner 
and timing by which the two agencies must act after the receipt of a 
complete submission under the rule, if they determine to issue such 
joint interpretation. In addition, paragraph (e)(5) of Rule 3a68-2 
provides that ``[i]f the Commission and the [CFTC] do not issue a joint 
interpretation within the time period described in paragraph (e)(1) or 
(e)(3) [of the rule], each of the Commission and the [CFTC] shall 
publicly provide the reasons for not issuing such a joint 
interpretation within the applicable timeframes.'' \5\
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    \3\ See Further Definition of ``Swap,'' ``Security-Based Swap,'' 
and ``Security-Based Swap Agreement''; Mixed Swaps; Security-Based 
Swap Agreement Recordkeeping, Exchange Act Release No. 67453 (Jul. 
18, 2012), 77 FR 48207 (Aug. 13, 2012) (``Product Definitions 
Adopting Release'').
    \4\ See Dodd-Frank Wall Street Reform and Consumer Protection 
Act, Public Law 111-203, 124 Stat. 1376 (2010). All references to 
``Title VII'' in this statement shall refer to Title VII of the 
Dodd-Frank Act, which established a comprehensive new regulatory 
framework for swaps and security-based swaps.
    \5\ Paragraph (e)(5) of CFTC Rule 1.8 contains identical 
language (other than reversing the references to the two 
commissions).
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    Pursuant to paragraph (e)(5) of Rule 3a68-2, the Commission is 
declining to issue a joint interpretation with the CFTC in connection 
with Breakaway's request.\6\ The Commission understands that the status 
of the RPAs is already subject to ongoing private litigation and that 
the petitioners' request may bear directly on that litigation. We 
believe that the Rule 3a68-2 process is not an appropriate vehicle for 
litigants such as Breakaway to obtain the views of the Commission in 
connection with issues in ongoing litigation, and we therefore decline 
Breakaway's request that we state an interpretive position as to the 
proper characterization of the RPAs.\7\
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    \6\ Commission staff has consulted and coordinated with CFTC 
staff and understands that the CFTC will be issuing a separate 
statement on this matter.
    \7\ As we and the CFTC explained when we jointly adopted Rule 
3a68-2 in 2012 (as well as the corresponding rule under the CEA), 
the purpose of the rule is to ``afford market participants with the 
opportunity to obtain greater certainty from the Commissions 
regarding the regulatory status of particular Title VII instruments 
under the Dodd-Frank Act. This provision should decrease the 
possibility that market participants inadvertently might fail to 
meet the regulatory requirements applicable to a particular Title 
VII instrument.'' See Product Definitions Adopting Release, 77 FR at 
48295. We and the CFTC also noted our belief that ``it is essential 
that the characterization of an instrument be established prior to 
any party engaging in the transactions so that the appropriate 
regulatory schemes apply.'' See Product Definitions Adopting 
Release, 77 FR at 48297.
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    Finally, to help ensure that requests under Rule 3a68-2 are 
expeditiously routed to appropriate staff, the Commission encourages 
market participants to provide the requests to the Office of the 
Secretary, with copies to the Division of Trading and Markets and the 
Division of Corporation Finance.

    By the Commission.

    Dated: June 7, 2017.
Brent J. Fields,
Secretary.
[FR Doc. 2017-12140 Filed 6-12-17; 8:45 am]
 BILLING CODE 8011-01-P