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Alternative Market Briefing

CFTC changes the definition of a US Person in swaps rules

Wednesday, August 21, 2013

Bailey McCann, Opalesque New York:

In July, the Commodities Futures Trading Commission (CFTC) issued final guidance on swaps compliance issues, and in that guidance the regulator quietly changed the definition of what it means to be a US person.

According to new, and final guidance that has already gone into effect, a US person is now amended solely with respect to the Commodity Exchange Act’s swap provisions and CFTC swap regulations. Under the new definition, US Person can also mean hedge funds and other collective investment vehicles which are either based in the US or primarily controlled by a US citizen.

According to a client alert from professional services firm Kinetic Partners, in order to meet amended compliance requirements, firms may want to consider the following:

  • Determine if any investment vehicles are caught by the new U.S. Person definition;
  • Determine if the funds enter into swaps subject to clearing;
  • Certify to each investment vehicle’s counterparties whether the investment vehicle is a U.S. Person;
  • Speak with investment vehicle’s counterparties and determine if the counterparty is a U.S. Person and, if not, obtain a 'Non-U.S. Person’ representation from the counterparty;
  • Determine who is going to report the swap transaction where applicable; and
  • Start negotiating with each investment vehicle’s counterparties the relevant tra......................

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