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ARTICLE · 15 MAY 2013

A Practical Guide To Lender Compliance With Eligible Contract Participant (ECP) Requirements

Reed Smith
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The LSTA Keepwell Terms are designed to automatically treat as "Qualified ECP Guarantors" all Obligors in the transaction that otherwise qualify as in such capacity as being able to "share" their ECP status as a Keepwell Obligor.

United StatesFinance and Banking
David Surbeck
David Surbeck
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Introduction

Pursuant to the Commodity Exchange Act (the "CEA"), as modified by Title VII of the Dodd-Frank Act and interpreted by the Commodity Futures Trading Commission ("CFTC"), it is "unlawful" for any person other than an "eligible contract participant" ("ECP") to enter into most swaps, including any over-the-counter interest rate derivative, such as a fixed-for-floating swap or cap ("Swap"). This prohibition applies not just to counterparties to a Swap ("Counterparties"), but also to all guarantors ("Guarantors") of the obligators under such Swap (the "Swap Obligations"). Any lender (a "Lender"), or agent for a group of Lenders (an "Agent"), that is party to a Swap must verify that each Counterparty and each Guarantor (each a "Swap Obligor") of the Swap Obligations is an ECP.

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