I 113th CONGRESS 1st Session H. R. 677 IN THE HOUSE OF REPRESENTATIVES February 13, 2013 Mr. Stivers (for himself, Ms. Fudge , Ms. Moore , Mr. Gibson , and Mr. Schweikert ) introduced the following bill; which was referred to the Committee on Financial Services , and in addition to the Committee on Agriculture , for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned A BILL To exempt inter-affiliate swaps from certain regulatory requirements put in place by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

1. Short title This Act may be cited as the Inter-Affiliate Swap Clarification Act . 2. Treatment of affiliate transactions (a) Commodity Exchange Act amendments (1) Treatment of affiliate transactions Section 1a(47) of the Commodity Exchange Act ( 7 U.S.C. 1a(47) ), as added by section 721(a)(21) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, is amended by adding at the end the following: (G) Treatment of affiliate transactions (i) In general For the purposes of any clearing and execution requirements under section 2(h) and any applicable margin and capital requirements of section 4s(e) and for purposes of defining swap dealer or major swap participant , and reporting requirements other than those set forth in clause (ii), the term swap does not include any agreement, contract, or transaction that— (I) would otherwise be included as a swap under subparagraph (A); and (II) is entered into by parties, neither of which is a ‘swap dealer’ that is an insured depository institution or a ‘major swap participant’ that is an insured depository institution, that report information or prepare financial statements on a consolidated basis, or for which a company affiliated with both parties reports information or prepares financial statements on a consolidated basis. (ii) Reporting All agreements, contracts, or transactions described in clause (i) shall be reported to either a swap data repository, or, if there is no swap data repository that would accept such agreements, contracts, or transactions, to the Commission pursuant to section 4r, or to a swap data repository or to the Commission pursuant to section 2(h)(5), within such time period as the Commission may by rule or regulation prescribe. Nothing in this subparagraph shall prohibit the Commission from establishing public reporting requirements for covered transactions between affiliates as described in sections 23A and 23B of the Federal Reserve Act in a manner consistent with rules governing the treatment of such covered transactions pursuant to section 2(a)(13) of this Act. (iii) Protection of insurance funds Nothing in this subparagraph shall be construed to prevent the regulator of a Federal or State insurance fund or guaranty fund from exercising its other existing authority to protect the integrity of such a fund, except that such regulator shall not subject agreements, contracts, or transactions described in clause (i) to clearing and execution requirements under section 2 of this Act, to any applicable margin and capital requirements of section 4s(e) of this Act, or to reporting requirements of title VII of Public Law 111–203 other than those set forth in clause (ii) of this subparagraph. (iv) Preservation of federal reserve act authority Nothing in this subparagraph shall exempt a transaction described in this subparagraph from sections 23A or 23B of the Federal Reserve Act or implementing regulations thereunder. (v) Preservation of federal and state regulatory authorities Nothing in this subparagraph shall affect the Federal banking agencies’ safety-and-soundness authorities over banks established in law other than title VII of Public Law 111–203 or the authorities of State insurance regulators over insurers, including the authority to impose capital requirements with regard to swaps. For purposes of this clause, the term ‘bank’ shall be defined pursuant to section 3(a)(6) of the Securities Exchange Act of 1934, ‘insurer’ shall be defined pursuant to title V of Public Law 111–203 , and ‘swap’ shall be defined pursuant to title VII of Public Law 111–203 . (vi) Prevention of evasion The Commission may prescribe rules under this subparagraph (and issue interpretations of such rules) as determined by the Commission to be necessary to include in the definition of swaps under this paragraph any agreement, contract, or transaction that has been structured to evade the requirements of this Act applicable to swaps. . (2) Treatment of affiliates Section 2(h)(7)(D)(i) of the Commodity Exchange Act ( 7 U.S.C. 2(h)(7)(D)(i) ), as added by section 723(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, is amended to read as follows: (i) In general An affiliate of a person that qualifies for an exception under subparagraph (A) (including affiliate entities predominantly engaged in providing financing for the purchase of the merchandise or manufactured goods of the person) may qualify for the exception only if the affiliate enters into the swap to hedge or mitigate the commercial risk of the person or other affiliate of the person that is not a financial entity. . (b) Securities Exchange Act of 1934 amendments (1) Treatment of affiliate transactions Section 3(a)(68) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78c(a)(68) ), as added by section 761(a)(6) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, is amended by adding at the end the following: (F) Treatment of affiliate transactions (i) In general For the purposes of any clearing and execution requirements under section 3C and any applicable margin and capital requirements of section 15F(e), and for purposes of defining security-based swap dealer or a major security-based swap participant , and reporting requirements other than those set forth in clause (ii), the term security-based swap does not include any agreement, contract, or transaction that— (I) would otherwise be included as a security-based swap under subparagraph (A); and (II) is entered into by parties, neither of which is a ‘security-based swap dealer’ that is an insured depository institution or a ‘major security-based swap participant’ that is an insured depository institution, that report information or prepare financial statements on a consolidated basis, or for which a company affiliated with both parties reports information or prepares financial statements on a consolidated basis. (ii) Reporting All agreements, contracts, or transactions described in clause (i) shall be reported to either a security-based swap data repository, or, if there is no security-based swap data repository that would accept such agreements, contracts, or transactions, to the Commission pursuant to section 13A, within such time period as the Commission may by rule or regulation prescribe. (iii) Preservation of federal reserve act authority Nothing in this subparagraph shall exempt a transaction described in this subparagraph from sections 23A or 23B of the Federal Reserve Act or implementing regulations thereunder. (iv) Protection of insurance funds Nothing in this subparagraph shall be construed to prevent the regulator of a Federal or State insurance fund or guaranty fund from exercising its other existing authority to protect the integrity of such a fund, except that such regulator shall not subject security-based swap transactions between affiliated companies to clearing and execution requirements under section 3C, to any applicable margin and capital requirements of section 15F(e), or to reporting requirements of title VII of Public Law 111–203 other than those set forth in clause (ii). (v) Preservation of federal and state regulatory authorities Nothing in this subparagraph shall affect the Federal banking agencies’ safety-and-soundness authorities over banks established in law other than title VII of Public Law 111–203 or the authorities of State insurance regulators over insurers, including the authority to impose capital requirements with regard to security-based swaps. For purposes of this clause, the term ‘bank’ shall be defined pursuant to section 3(a)(6) of the Securities Exchange Act of 1934, ‘insurer’ shall be defined pursuant to title V of Public Law 111–203 , and ‘security-based swap’ shall be defined pursuant to title VII of Public Law 111–203 . (vi) Prevention of evasion The Commission may prescribe rules under this subparagraph (and issue interpretations of such rules) as determined by the Commission to be necessary to include in the definition of security-based swap under this paragraph any agreement, contract, or transaction that has been structured to evade the requirements of this Act applicable to security-based swaps. . (2) Treatment of affiliates Section 3C(g)(4)(A) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78c-3(g)(4)(A) ), as added by section 763(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, is amended to read as follows: (i) In general An affiliate of a person that qualifies for an exception under this subsection (including affiliate entities predominantly engaged in providing financing for the purchase of the merchandise or manufactured goods of the person) may qualify for the exception only if the affiliate enters into the security-based swap to hedge or mitigate the commercial risk of the person or other affiliate of the person that is not a financial entity. .