Document ID: SEC-2017-0241-0001
Agency: sec
Document Type: Rule
Title: Exemptions for Security-Based Swaps
Posted Date: 2017-02-15T05:00Z

[Federal Register Volume 82, Number 30 (Wednesday, February 15, 2017)]
[Rules and Regulations]
[Pages 10703-10707]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-03121]

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 230, 240, and 260

[Release Nos. 33-10305; 34-80023; 39-2515; File No. S7-26-11]
RIN 3235-AL17

Exemptions for Security-Based Swaps

AGENCY: Securities and Exchange Commission.

ACTION: Interim final rule.

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SUMMARY: We are adopting amendments to the expiration dates in our 
interim final rules that provide exemptions under the Securities Act of 
1933, the Securities Exchange Act of 1934, and the Trust Indenture Act 
of 1939 for those security-based swaps that prior to July 16, 2011 were 
security-based swap agreements and are defined as ``securities'' under 
the Securities Act and the Exchange Act as of July 16, 2011 due solely 
to the provisions of Title VII of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act. Under the amendments, the expiration dates in 
the interim final rules will be February 11, 2018.

DATES: The amendments are effective February 15, 2017. See Section I of 
the SUPPLEMENTARY INFORMATION concerning amendment of expiration dates 
in the interim final rules.

FOR FURTHER INFORMATION CONTACT: 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 20549-3628.

SUPPLEMENTARY INFORMATION: We are adopting amendments to the following 
rules: Interim final Rule 240 under the Securities Act of 1933 
(``Securities Act''),\1\ interim final Rules 12a-11 and 12h-1(i) under 
the Securities Exchange Act of 1934 (``Exchange Act''),\2\ and interim 
final Rule 4d-12 under the Trust Indenture Act of 1939 (``Trust 
Indenture Act'').\3\
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    \1\ 15 U.S.C. 77a et seq.
    \2\ 15 U.S.C. 78a et seq.
    \3\ 15 U.S.C. 77aaa et seq.
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I. Amendment of Expiration Dates in the Interim Final Rules

A. Background Regarding the Interim Final Rules

    In July 2011, we adopted interim final Rule 240 under the 
Securities Act, interim final Rules 12a-11 and 12h-1(i) under the 
Exchange Act, and interim final Rule 4d-12 under the Trust Indenture 
Act (collectively, the ``interim final rules'').\4\ The interim final 
rules provide exemptions under the Securities Act, the Exchange Act, 
and the Trust Indenture Act for those security-based swaps that prior 
to July 16, 2011 (``Title VII effective date'') were ``security-based 
swap agreements'' and are defined as ``securities'' under the 
Securities Act and the Exchange Act as of the Title VII effective date 
due solely to the provisions of Title VII of the Dodd-Frank Act.\5\ The 
interim final rules exempt offers and sales of security-based swap 
agreements that became security-based swaps on the Title VII effective 
date from all provisions of the Securities Act, other than the Section 
17(a) anti-fraud provisions, as well as from the Exchange Act 
registration requirements and from the provisions of the Trust 
Indenture Act,\6\ provided certain conditions are met.\7\ We have 
adopted amendments to the interim final rules to extend the expiration 
dates in the interim final rules, first from February 11, 2013 to 
February 11, 2014,\8\ and then from February 11, 2014 to February 11, 
2017.\9\
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    \4\ See 17 CFR 230.240, 17 CFR 240.12a-11, 17 CFR 240.12h-1, and 
17 CFR 260.4d-12. See also Exemptions for Security-Based Swaps, 
Release No. 33-9231 (Jul. 1, 2011), 76 FR 40605 (Jul. 11, 2011) 
(``Interim Final Rules Adopting Release'').
    \5\ The Dodd-Frank Wall Street Reform and Consumer Protection 
Act, Public Law 111-203, 124 Stat. 1376 (2010). The provisions of 
Title VII generally were effective on July 16, 2011 (360 days after 
enactment of the Dodd-Frank Act), unless a provision requires a 
rulemaking. If a Title VII provision requires a rulemaking, it will 
go into effect ``not less than'' 60 days after publication of the 
related final rule or on July 16, 2011, whichever is later. See 
Section 774 of the Dodd-Frank Act.
    \6\ The category of security-based swaps covered by the interim 
final rules involves those that would have been defined as 
``security-based swap agreements'' prior to the enactment of Title 
VII. That definition of ``security-based swap agreement'' does not 
include security-based swaps that are based on or reference only 
loans and indexes only of loans. The Division of Corporation Finance 
issued a no-action letter that addressed the availability of the 
interim final rules to offers and sales of security-based swaps that 
are based on or reference only loans or indexes only of loans. See 
Cleary Gottlieb Steen & Hamilton LLP (Jul. 15, 2011). The Cleary 
Gottlieb No-Action Letter will remain in effect for so long as the 
interim final rules remain in effect.
    \7\ The security-based swap that is exempt must be a security-
based swap agreement (as defined prior to the Title VII effective 
date) and entered into between eligible contract participants (as 
defined prior to the Title VII effective date). See Rule 240 under 
the Securities Act [17 CFR 230.240]. See also Interim Final Rules 
Adopting Release.
    \8\ See Extension of Exemptions for Security-Based Swaps, 
Release No. 33-9383 (Jan. 29, 2013), 78 FR 7654 (Feb. 4, 2013).
    \9\ See Extension of Exemptions for Security-Based Swaps, 
Release No. 33-9545 (Feb. 5, 2014), 79 FR 7570 (Feb. 10, 2014) 
(``Extension Adopting Release'').
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    Title VII amended the Securities Act and the Exchange Act to 
include ``security-based swaps'' in the definition of ``security'' for 
purposes of those statutes.\10\ As a result, ``security-based swaps'' 
became subject to the provisions of the Securities Act and the Exchange 
Act and the rules and regulations thereunder applicable to 
``securities.'' \11\

[[Page 10704]]

The interim final rules were intended to allow security-based swap 
agreements that became security-based swaps on the Title VII effective 
date to continue to trade as they did prior to the enactment of Title 
VII.\12\ We adopted the interim final rules because, among other 
things, we were concerned about disrupting the operation of the 
security-based swaps market while we evaluated the implications for 
security-based swaps under the Securities Act and the Exchange Act as a 
result of the inclusion of the term ``security-based swap'' in the 
definition of ``security'' for purposes of those statutes.\13\
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    \10\ See Sections 761(a)(2) and 768(a)(1) of the Dodd-Frank Act 
(amending Section 3(a)(10) of the Exchange Act [15 U.S.C. 
78c(a)(10)] and Section 2(a)(1) of the Securities Act [15 U.S.C. 
77b(a)(1)], respectively).
    \11\ The Securities Act requires that any offer and sale of a 
security must be either registered under the Securities Act or made 
pursuant to an exemption from registration. See Section 5 of the 
Securities Act [15 U.S.C. 77e]. In addition, certain provisions of 
the Exchange Act relating to the registration of classes of 
securities and the indenture qualification provisions of the Trust 
Indenture Act of 1939 (``Trust Indenture Act'') [15 U.S.C. 77aaa et 
seq.] also potentially could apply to security-based swaps. The 
provisions of Section 12 of the Exchange Act could, without an 
exemption, require that security-based swaps be registered before a 
transaction could be effected on a national securities exchange. See 
Section 12(a) of the Exchange Act [15 U.S.C. 78l(a)]. In addition, 
registration of a class of security-based swaps under Section 12(g) 
of the Exchange Act could be required if the security-based swap is 
considered an equity security and held of record by either 2000 
persons or 500 persons who are not accredited investors at the end 
of a fiscal year. See Section 12(g)(1)(A) of the Exchange Act [15 
U.S.C. 78l(g)(1)(A)]. Further, without an exemption, the Trust 
Indenture Act could require qualification of an indenture for 
security-based swaps considered to be debt. See 15 U.S.C. 77aaa et 
seq.
    \12\ See Interim Final Rules Adopting Release.
    \13\ Id. Prior to the Title VII effective date, security-based 
swap agreements that became security-based swaps on the Title VII 
effective date were outside the scope of the federal securities 
laws, other than the anti-fraud and certain other provisions. See 
Section 2A of the Securities Act [15 U.S.C. 77b(b)-1)] and Section 
3A of the Exchange Act [15 U.S.C. 78c-1], each as in effect prior to 
the Title VII effective date.
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    At the time of adoption of the interim final rules in July 2011, we 
requested comment on various aspects of the interim final rules.\14\ In 
response to the request for comment, commenters expressed concerns 
regarding the availability of exemptions from the registration 
requirements of the Securities Act, including the exemption in Section 
4(a)(2), for security-based swap transactions entered into solely 
between eligible contract participants (``ECPs'') due to the operation 
of certain trading platforms and the publication or distribution of 
other information regarding security-based swaps.\15\ Commenters 
indicated that the publication or distribution of certain 
communications involving security-based swaps on an unrestricted basis 
could be viewed as offers of those security-based swaps within the 
meaning of Section 2(a)(3) of the Securities Act,\16\ and such 
communications would require compliance with the registration 
provisions of Section 5 of the Securities Act unless there is an 
available exemption from such registration requirements.\17\ Further, 
such communications may be considered offers to persons who are not 
ECPs, even if such persons are not permitted to purchase the security-
based swaps.\18\ Under Section 5(e) of the Securities Act, it is 
unlawful to make offers or sales of security-based swaps to persons who 
are not ECPs unless the security-based swaps are registered under the 
Securities Act.\19\ Commenters indicated that if there is no Securities 
Act exemption available with respect to a security-based swap 
transaction, the required registration of such transactions could 
negatively impact the security-based swaps market.\20\
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    \14\ See Interim Final Rules Adopting Release. The Commission 
also requested comment on certain of these matters in an earlier 
proposing release regarding exemptions for security-based swap 
transactions involving an eligible clearing agency. See Exemptions 
For Security-Based Swaps Issued By Certain Clearing Agencies, 
Release No. 33-9222 (Jun. 9, 2011), 76 FR 34920 (Jun. 15, 2011).
    \15\ See Extension Adopting Release.
    \16\ See 15 U.S.C. 77b(a)(3).
    \17\ See Extension Adopting Release.
    \18\ Id.
    \19\ See Section 5(e) of the Securities Act [15 U.S.C. 77e(e)]) 
(Notwithstanding the provisions of section 3 or 4, unless a 
registration statement meeting the requirements of section 10(a) is 
in effect as to a security-based swap, it shall be unlawful for any 
person, directly or indirectly, to make use of any means or 
instruments of transportation or communication in interstate 
commerce or of the mails to offer to sell, offer to buy or purchase 
or sell a security-based swap to any person who is not an eligible 
contract participant).
    \20\ See Extension Adopting Release.
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    As noted above, we twice have extended the expiration dates in the 
interim final rules.\21\ These extensions have enabled us to continue 
our evaluation of the implications for security-based swaps as 
securities and determine whether other regulatory action is 
appropriate. We indicated when we extended the expiration dates that we 
were carefully considering the comments we had received on the interim 
final rules as part of our evaluation of the implications for security-
based swaps resulting from the inclusion of the term ``security-based 
swap'' in the definition of ``security'' under the Securities Act and 
the Exchange Act.\22\ We continue to consider those comments as we 
evaluate whether other regulatory action is appropriate, including the 
proposal discussed in the next section.
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    \21\ See footnotes 8 and 9 above and accompanying text.
    \22\ See Extension Adopting Release.
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B. SBS Communications Proposal

    Subsequent to the most recent extension of the expiration dates in 
the interim final rules, we proposed a rule under the Securities Act to 
provide that certain communications involving security-based swaps that 
may be purchased only by ECPs would not be deemed for purposes of 
Section 5 of the Securities Act to constitute offers of the security-
based swaps that are the subject of such communications or any 
guarantees of such security-based swaps that are securities (``SBS 
Communications Proposal'').\23\ The SBS Communications Proposal would 
cover the dissemination of price quotes that relate to security-based 
swaps that may be purchased only by ECPs and are traded or processed on 
or through certain trading platforms. The SBS Communications Proposal 
would enable price quotes relating to security-based swaps to be 
disseminated on an unrestricted basis without concern that such 
dissemination could jeopardize the availability of exemptions from the 
registration requirements of the Securities Act for transactions 
involving the security-based swaps that are the subject of such 
communications. The Commission requested comment on all aspects of the 
SBS Communications Proposal, including whether it should cover types of 
communications other than price quotes, such as communications 
characterized as research that relate to or discuss security-based 
swaps.\24\ The Commission is evaluating the comments received and has 
not yet taken final action as to the SBS Communications Proposal.
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    \23\ See Treatment of Certain Communications Involving Security-
Based Swaps That May Be Purchased Only By Eligible Contract 
Participants, Release No. 33-9643 (Sep. 8, 2014), 79 FR 54224 (Sep. 
11, 2014) (``SBS Communications Proposing Release'').
    \24\ Id. The SBS Communications Proposing Release discussed the 
types of communications covered and not covered by the proposal and 
included an extensive request for comment about communications 
characterized as research that relate to security-based swaps.
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C. Extension of the Interim Final Rules

    In this release, we are extending the expiration dates in the 
interim final rules from February 11, 2017 to February 11, 2018. We 
believe that the interim final rules are needed to avoid disruption in 
the security-based swaps market while we continue to consider in a 
thorough and deliberative manner whether other regulatory action is 
appropriate. If the interim final rules expire on February 11, 2017, 
market participants entering into security-based swap transactions will 
have to consider whether they need to register the offer and sale of 
the security-based swaps under the Securities Act. Market participants 
also will have to consider whether they may be required to comply with 
the registration provisions of the Exchange Act applicable to classes 
of securities and the indenture provisions of the Trust Indenture Act. 
We believe that requiring compliance with these provisions while we 
continue to evaluate the implications for security-based swaps as 
securities and determine whether other regulatory action, including the 
SBS Communications Proposal, is appropriate could have an impact on the 
operation of the security-based swaps market. Thus, the interim

[[Page 10705]]

final rules are needed to allow market participants that meet the 
conditions of the interim final rules to continue to enter into 
security-based swap transactions without concern that such activities 
may not comply with the applicable provisions of the Securities Act, 
the Exchange Act, and the Trust Indenture Act.
    Based on the foregoing, we believe that it is necessary and 
appropriate in the public interest and consistent with the protection 
of investors to continue providing the exemptions from all provisions 
of the Securities Act (other than the Section 17(a) antifraud 
provisions), the registration requirements of the Exchange Act relating 
to classes of securities, and the indenture provisions of the Trust 
Indenture Act for those security-based swaps that prior to the Title 
VII effective date were security-based swap agreements, provided 
certain conditions are met. Accordingly, due to the interrelationship 
between the interim final rules and our continuing evaluation of 
further appropriate regulatory action, we have determined that it is 
necessary and appropriate to extend the expiration dates in the interim 
final rules from February 11, 2017 to February 11, 2018.\25\ If we 
adopt further rules relating to issues raised in the SBS Communications 
Proposing Release about the application of the Securities Act or the 
other federal securities laws to security-based swaps before February 
11, 2018, we may determine to alter the expiration dates in the interim 
final rules as part of that rulemaking. We only are extending the 
expiration dates in the interim final rules; we are not making any 
other changes to the interim final rules.
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    \25\ In conjunction with the extension of the expiration dates 
in the interim final rules, we also extended certain of the 
temporary relief we adopted in July 2011 that provided exemptions 
from compliance with certain provisions of the Exchange Act to 
February 5, 2018. This relief was set to expire on February 5, 2017 
and exempts security-based swap activities from the application of 
the Exchange Act other than certain antifraud and anti-manipulation 
provisions, all Exchange Act provisions related to security-based 
swaps added or amended by Title VII of the Dodd-Frank Act, including 
the amended definition of ``security'' in Section 3(a)(10), and 
certain other Exchange Act provisions. See Order Extending Certain 
Temporary Exemptions under the Securities Exchange Act of 1934 in 
Connection with the Revision of the Definition of ``Security'' to 
Encompass Security-Based Swaps and Request for Comment, Release No. 
34-79833 (Jan. 18, 2017), 82 FR 8467 (Jan. 25, 2017). See also Order 
Granting Temporary Exemptions under the Securities Exchange Act of 
1934 in Connection with the Pending Revisions of the Definition of 
``Security'' to Encompass Security-Based Swaps, Release No. 34-64795 
(Jul. 1, 2011), 76 FR 39927 (Jul. 7, 2011).
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II. Certain Administrative Law Matters

    Section 553(b) of the Administrative Procedure Act \26\ generally 
requires an agency to publish notice of a proposed rulemaking in the 
Federal Register. This requirement does not apply, however, if the 
agency ``for good cause finds (and incorporates the finding and a brief 
statement of reasons therefore in the rules issued) that notice and 
public procedure thereon are impracticable, unnecessary, or contrary to 
the public interest.'' \27\ Further, the Administrative Procedure Act 
also generally requires that an agency publish an adopted rule in the 
Federal Register 30 days before it becomes effective.\28\ This 
requirement does not apply, however, if the agency finds good cause for 
making the rule effective sooner.\29\ We, for good cause, find that 
notice and solicitation of comment before adopting the amendments to 
the interim final rules is impracticable, unnecessary, or contrary to 
the public interest. We also find good cause not to delay the effective 
date of the amendments to the interim final rules.
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    \26\ 5 U.S.C. 553(b).
    \27\ Id.
    \28\ See 5 U.S.C. 553(d).
    \29\ Id.
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    For the reasons we discuss throughout this release, we believe that 
we have good cause to act immediately to adopt the amendments to the 
interim final rules to extend the expiration dates in the interim final 
rules. The extension of the expiration dates in the interim final rules 
is intended to minimize disruptions and costs to the security-based 
swaps market that could occur if the interim final rules expire. The 
interim final rules are needed to allow market participants that meet 
the conditions of the interim final rules to continue to enter into 
security-based swap transactions without concern that such activities 
will be subject to the registration requirements of the Securities Act 
and the Exchange Act and the indenture qualification provisions of the 
Trust Indenture Act while we continue to evaluate the implications for 
security-based swaps as securities and determine whether other 
regulatory action, including the SBS Communications Proposal, is 
appropriate.
    Absent an extension, the interim final rules will expire on 
February 11, 2017. The interim final rules have been in place since 
July 2011 and market participants have relied on them to enter into 
security-based swap transactions. Extending the expiration dates in the 
interim final rules will not affect the substantive provisions of the 
interim final rules and will allow market participants that meet the 
conditions of the interim final rules to continue to enter into 
security-based swap transactions without concern that such activities 
will be subject to the registration requirements of the Securities Act 
and the Exchange Act and the indenture qualification provisions of the 
Trust Indenture Act while we continue to evaluate the implications for 
security-based swaps as securities and determine whether other 
regulatory action, including the SBS Communications Proposal, is 
appropriate. Based on the foregoing and for the reasons we discuss 
throughout this release, we find that there is good cause to have the 
amendments to the interim final rules effective upon publication in the 
Federal Register and that notice and solicitation of comment in advance 
of the effectiveness of the amendments to the interim final rules is 
impracticable, unnecessary or contrary to the public interest.\30\
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    \30\ This finding also satisfies the requirements of 5 U.S.C. 
808(2), allowing the rule amendment to become effective 
notwithstanding the requirement of 5 U.S.C. 801 (if a federal agency 
finds that notice and public comment are ``impractical, unnecessary 
or contrary to the public interest,'' a rule ``shall take effect at 
such time as the federal agency promulgating the rule determines'').
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III. Economic Analysis

    We are mindful of the costs imposed by, and the benefits to be 
obtained from, our rules. Section 2(b) of the Securities Act and 
Section 3(f) of the Exchange Act require the Commission, whenever it 
engages in rulemaking and is required to consider or determine whether 
an action is necessary or appropriate in the public interest, to 
consider, in addition to the protection of investors, whether the 
action would promote efficiency, competition, and capital 
formation.\31\ In addition, Section 23(a)(2) of the Exchange Act 
requires the Commission, when making rules under the Exchange Act, to 
consider the impact such rules would have on competition.\32\ Section 
23(a)(2) of the Exchange Act prohibits the Commission from adopting any 
rule that would impose a burden on competition not necessary or 
appropriate in furtherance of the purposes of the Exchange Act.\33\
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    \31\ See 15 U.S.C. 77b(b) and 15 U.S.C. 78c(f).
    \32\ See 15 U.S.C. 78w(a)(2).
    \33\ Id.
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    As discussed above, we are adopting amendments to the interim final 
rules to extend the expiration dates in the interim final rules to 
February 11, 2018. Extending the expiration dates in the interim final 
rules is intended to minimize disruptions and costs to the security-
based swaps market that could

[[Page 10706]]

occur on the current expiration date of the interim final rules. The 
interim final rules are needed to allow market participants that meet 
the conditions of the interim final rules to continue to enter into 
security-based swap transactions without concern that such activities 
will be subject to the registration requirements of the Securities Act 
and the Exchange Act and the indenture qualification provisions of the 
Trust Indenture Act.
    The interim final rules currently in effect serve as the economic 
baseline against which the costs and benefits, as well as the impact on 
efficiency, competition, and capital formation, of the amendments are 
measured. Because the extension of the expiration dates in the interim 
final rules maintains the status quo, we do not expect additional 
significant costs or benefits to result from the extension. We also do 
not expect the extension to have additional significant effects on 
efficiency, competition, or capital formation. The interim final rules 
will continue to exempt certain security-based swaps from all 
provisions of the Securities Act, other than the Section 17(a) 
antifraud provisions,\34\ as well as exempt these security-based swaps 
from Exchange Act registration requirements, and from the provisions of 
the Trust Indenture Act, provided certain conditions are met.
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    \34\ See 15 U.S.C. 77q(a).
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    In the alternative, we could allow the interim final rules to 
expire by not extending their expiration date. In this scenario, market 
participants who continue to effect security-based swap transactions 
would have to determine whether another exemption from the registration 
requirements of the Securities Act is available so that they may be 
able to rely on that exemption. If no Securities Act exemptions are 
available for a security-based swap transaction following the 
expiration of the interim final rules, such a transaction would have to 
be registered under the Securities Act. The counterparties to such a 
transaction also would have to consider whether they need to comply 
with the registration requirements of the Exchange Act and the 
indenture provisions of the Trust Indenture Act. We believe that 
requiring compliance with these provisions at this time for security-
based swap transactions between ECPs likely would disrupt and impose 
new costs on this segment of the security-based swaps market. For 
example, if market participants are required to register the offer and 
sale of these security-based swaps under the Securities Act, they would 
have to incur the additional costs of such registration, including 
legal and accounting costs, as well as the costs associated with 
preparing the disclosure documents describing these security-based 
swaps. Market participants also may incur costs associated with the 
registration of these security-based swaps under the Exchange Act and 
compliance with the Trust Indenture Act, including preparing indentures 
and arranging for the services of a trustee.
    It is also possible that if we were to allow the interim final 
rules to expire, efficiency and capital formation may be impaired. 
Failing to extend the expiration dates in the interim final rules may 
result in disruptions and costs to the security-based swaps market that 
could impede efficiency. Additionally, some market participants may not 
continue to participate in certain security-based swap transactions if 
compliance with these provisions were infeasible (economically or 
otherwise). In that case, capital formation may be impaired to the 
extent that some market participants use these security-based swap 
transactions to hedge risks, including those related to the issuance of 
the referenced securities (as may occur with equity swaps and the 
issuance of convertible bonds). For example, if registration of these 
transactions is required under our existing Securities Act registration 
scheme, issuers of security-based swaps may be forced to provide 
disclosure about their security-based swap positions that might not 
otherwise be disclosed to the market. This position disclosure could 
lead to a decreased use of security-based swaps by these market 
participants, which could potentially impair capital formation to the 
extent counterparties might use security-based swaps for hedging their 
exposure to issuers of referenced securities. Such a decrease in the 
use of security-based swaps also could lead to reduced liquidity of the 
underlying securities, which could raise the costs of capital for 
issuers of those securities.
    We also recognize that there may be certain benefits associated 
with letting the interim final rules expire. Without the exemptions 
provided for in the interim final rules, a market participant may have 
to file a registration statement covering the offer and sale of the 
security-based swaps, may have to register the class of security-based 
swaps that it has issued under the Exchange Act, and may have to 
satisfy the applicable provisions of the Trust Indenture Act, which 
would provide investors with additional information and in certain 
cases civil remedies. For example, a registration statement covering 
the offer and sale of the security-based swaps may provide certain 
information about the market participants, the security-based swap 
contract terms, and the identification of the particular reference 
securities, issuers, or loans underlying the security-based swap. 
Additionally, although investors currently may pursue antifraud actions 
in connection with the purchase and sale of security-based swaps under 
Section 10(b) of the Exchange Act,\35\ if market participants were 
required to file registration statements under the Securities Act, 
investors may also be able to pursue civil remedies under Sections 11 
or 12 of the Securities Act.\36\
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    \35\ See 15 U.S.C. 78j(b).
    \36\ See 15 U.S.C. 77k-l. Regardless of the extension, however, 
we can always pursue an antifraud action in the offer and sale of 
security-based swaps under Section 17(a) of the Securities Act. See 
15 U.S.C. 77q.
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IV. Paperwork Reduction Act

    The interim final rules do not impose any new ``collections of 
information'' within the meaning of the Paperwork Reduction Act of 1995 
(``PRA''),\37\ nor do they create any new filing, reporting, 
recordkeeping, or disclosure reporting requirements. Accordingly, we 
did not submit the interim final rules to the Office of Management and 
Budget for review in accordance with the PRA.\38\ We requested comment 
on whether our conclusion that there are no collections of information 
is correct, and we did not receive any comment.
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    \37\ 44 U.S.C. 3501 et seq.
    \38\ 44 U.S.C. 3507(d) and 5 CFR 1320.11.
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V. Regulatory Flexibility Act Certification

    We hereby certify pursuant to 5 U.S.C. 605(b) that extending the 
expiration dates in the interim final rules will not have a significant 
economic impact on a substantial number of small entities.\39\ The 
interim final rules apply only to counterparties that may engage in 
security-based swap transactions in reliance on the interim final rule 
providing an exemption under the Securities Act. The interim final rule 
under the Securities Act provides that the exemption is available only 
to security-based swaps that are entered into between eligible contract 
participants, as that term is defined in Section 1a(12) of the 
Commodity Exchange Act as in effect prior to the Title VII effective 
date, and other than with respect to persons determined by

[[Page 10707]]

the CFTC to be eligible contract participants pursuant to Section 
1a(12)(C) of the Commodity Exchange Act. Based on our existing 
information about the security-based swaps market, including our 
existing information about participants in the security-based swaps 
market, we believe that the interim final rules apply to few, if any, 
small entities. For this reason, the extension of the expiration dates 
in the interim final rules should not have a significant economic 
impact on a substantial number of small entities.
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    \39\ We certified pursuant to 5 U.S.C. 605(b) that the interim 
final rules will not have a significant economic impact on a 
substantial number of small entities. See Interim Final Rules 
Adopting Release. We received no comments on that certification.
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VI. Statutory Authority and Text of the Rules and Amendments

    The amendments described in this release are being adopted under 
the authority set forth in Sections 19 and 28 of the Securities Act, 
Sections 12(h), 23(a) and 36 of the Exchange Act, and Section 304(d) of 
the Trust Indenture Act.

List of Subjects in 17 CFR Parts 230, 240 and 260

    Reporting and recordkeeping requirements, Securities.

Text of the Rules and Amendments

    For the reasons set out in the preamble, the Commission amends 17 
CFR parts 230, 240, and 260 as follows:

PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933

0
1. The authority citation for part 230 continues to read, in part, as 
follows:

    Authority: 15 U.S.C. 77b, 77b note, 77c, 77d, 77d note, 77f, 
77g, 77h, 77j, 77r, 77s, 77z-3, 77sss, 78c, 78d, 78j, 78l, 78m, 78n, 
78o, 78o-7 note, 78t, 78w, 78ll(d), 78mm, 80a-8, 80a-24, 80a-28, 
80a-29, 80a-30, and 80a-37, and Pub. L. 112-106, sec. 201(a), sec. 
401, 126 Stat. 313 (2012), unless otherwise noted.
* * * * *

Sec.  230.240  [Amended]

0
2. Section 230.240 is revised to read as follows:

Sec.  230.240  Exemption for certain security-based swaps.

    (a) Except as expressly provided in paragraph (b) of this section, 
the Act does not apply to the offer or sale of any security-based swap 
that is:
    (1) A security-based swap agreement, as defined in Section 2A of 
the Act (15 U.S.C. 77b(b)-1) as in effect prior to July 16, 2011; and
    (2) Entered into between eligible contract participants (as defined 
in Section 1a(12) of the Commodity Exchange Act (7 U.S.C. 1a(12)) as in 
effect prior to July 16, 2011, other than a person who is an eligible 
contract participant under Section 1a(12)(C) of the Commodity Exchange 
Act as in effect prior to July 16, 2011).
    (b) The exemption provided in paragraph (a) of this section does 
not apply to the provisions of Section 17(a) of the Act (15 U.S.C. 
77q(a)).
    (c) This section will expire on February 11, 2018.

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
1934

0
3. The authority citation for part 240 continues to read, in part, as 
follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f, 
78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o, 78o-4, 
78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78ll, 78mm, 80a-20, 
80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11, 7201 et seq. and 8302; 
7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 1350; Pub. L. 
111-203, 939A, 124 Stat. 1376 (2010); and Pub. L. 112-106, sec. 503 
and 602, 126 Stat. 326 (2012), unless otherwise noted.
* * * * *

Sec.  240.12a-11  [Amended]

0
4. Section 240.12a-11 is revised to read as follows:

Sec.  240.12a-11  Exemption of security-based swaps sold in reliance on 
Securities Act of 1933 Rule 240 (Sec.  230.240) from section 12(a) of 
the Act.

    (a) The provisions of Section 12(a) of the Act (15 U.S.C. 78l(a)) 
do not apply to any security-based swap offered and sold in reliance on 
Sec.  230.240 of this chapter.
    (b) This section will expire on February 11, 2018.

Sec.  240.12h-1  [Amended]

0
5. In Sec.  240.12h-1, paragraph (i) is revised to read as follows:

Sec.  240.12h-1  Exemptions from registration under section 12(g) of 
the Act.

* * * * *
    (i) Any security-based swap offered and sold in reliance on Sec.  
230.240 of this chapter. This section will expire on February 11, 2018.

PART 260--GENERAL RULES AND REGULATIONS, TRUST INDENTURE ACT OF 
1939

0
6. The authority citation for part 260 continues to read as follows:

    Authority: 15 U.S.C. 77c, 77ddd, 77eee, 77ggg, 77nnn, 77sss, 
78ll(d), 80b-3, 80b-4, and 80b-11, unless otherwise noted.
* * * * *

Sec.  260.4d-12  [Amended]

0
7. Section 260.4d-12 is revised to read as follows:

Sec.  260.4d-12  Exemption for security-based swaps offered and sold in 
reliance on Securities Act of 1933 Rule 240 (Sec.  230.240).

    Any security-based swap offered and sold in reliance on Sec.  
230.240 of this chapter, whether or not issued under an indenture, is 
exempt from the Act. This section will expire on February 11, 2018.

    By the Commission.

     Dated: February 10, 2017.
Brent J. Fields,
Secretary.
[FR Doc. 2017-03121 Filed 2-14-17; 8:45 am]
BILLING CODE 8011-01-P