Extraterritoriality: SEC Proposes Cross-Border Security-Based Swap Rules Regarding U.S.-Based Activity

On April 29, 2015, the Securities and Exchange Commission ("SEC") proposed rules that would apply certain aspects of its security-based swap regulations (when they become effective) to transactions involving non-US parties that are arranged or executed using US personnel or agents.

Overview

The proposed rules weigh in on a controversial issue concerning the scope of US regulation—the extent to which US rules apply to transactions that would otherwise be outside of US jurisdiction, but which are effected using US personnel. The SEC's proposal follows in the wake of, and is similar in certain respects to, an advisory published by the Commodity Futures Trading Commission ("CFTC") staff (the "CFTC Staff Advisory").¹ That advisory, which has been the subject of substantial criticism from market participants, took the position that so-called transaction-level requirements should generally apply to a non-US swap dealer effecting a transaction through US personnel or a US