January 18, 2017.
The Securities and Exchange Commission (“Commission”) is (i) extending certain temporary exemptive relief originally provided by the Commission in connection with the revision of the definition of “security” in the Securities Exchange Act of 1934 (“Exchange Act”) to encompass security-based swaps (“Temporary Exemptions”); 
and (ii) requesting comment on whether continuing exemptive relief is necessary beyond February 5, 2018. These temporary exemptions were provided by the Commission on July 1, 2011 and most recently extended by the Commission on February 5, 2014.
Certain of the Temporary Exemptions are set to expire on February 5, 2017.
The expiration dates in the Extension Order distinguished between: (i) The Temporary Exemptions related to pending security-based swap rulemakings (“Linked Temporary Exemptions”); and (ii) the Temporary Exemptions that generally were not directly related to a specific security-based swap rulemaking (“Unlinked Temporary Exemptions”). The expiration dates for the Linked Temporary Exemptions established by the Extension Order were the compliance dates for the specific rulemakings to which they were “linked,” and the expiration date for the Unlinked Temporary Exemptions was three years following the effective date of the Extension Order (i.e., February 5, 2017), or such time that the Commission issues an order or rule determining whether continuing exemptive relief is appropriate for security-based swaps with respect to any such Unlinked Temporary Exemptions.
As described in more detail below, the Commission is extending the expiration date for the Unlinked Temporary Exemptions until February 5, 2018. This approach provides the Commission flexibility to determine whether continuing relief should be provided for any Unlinked Temporary Exemptions while the Commission continues to consider the relevant rules mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
This release has no effect on the expiration dates for the Linked Temporary Exemptions.
Title VII of the Dodd-Frank Act amended the definition of “security” under the Exchange Act to expressly encompass security-based swaps.
The expansion of the definition of the term “security” changed the scope of the Exchange Act regulatory provisions that apply to security-based swaps and Start Printed Page 8468raised certain complex questions that require further consideration.
On July 1, 2011, the Commission issued the Exchange Act Exemptive Order granting temporary exemptive relief from compliance with certain provisions of the Exchange Act in connection with the revision of the Exchange Act definition of “security” to encompass security-based swaps.
The Exchange Act Exemptive Order granted temporary exemptive relief from compliance with certain provisions of the Exchange Act in connection with security-based swap activity by: (i) Any person who meets the definition of “eligible contract participant” (“ECPs”) set forth in Section 1a(12) of the Commodity Exchange Act as of the day prior to the enactment of the Dodd-Frank Act (July 20, 2010) and (ii) a broker or dealer registered under Section 15(b) of the Exchange Act.
The overall approach of the Exchange Act Exemptive Order was directed toward maintaining the status quo during the implementation process for the Dodd-Frank Act by preserving the application of particular Exchange Act requirements that were already applicable in connection with instruments that became “security-based swaps” following the Effective Date of the Dodd-Frank Act,
but deferring the applicability of additional Exchange Act requirements in connection with those instruments explicitly being defined as “securities” as of the Effective Date.
As described above, the Commission most recently extended the expiration date of the Unlinked Temporary Exemptions until the earlier of the time that the Commission issues an order or rule determining whether continuing exemptive relief is appropriate, or until three years after the effective date of the Extension Order.
This approach was designed to provide the Commission with flexibility while its Dodd-Frank Act rulemaking is still in progress to determine whether continuing relief should be provided for any of the Unlinked Temporary Exemptions.
B. Extension of Unlinked Temporary Exemptions
Since the issuance of the Extension Order, the Commission has implemented a substantial portion of the regulatory regime for security-based swaps required by Title VII of the Dodd-Frank Act.
However, the Commission Start Printed Page 8469is still in the process of considering its rules under Title VII of the Dodd-Frank Act.
Therefore, the Commission believes it is necessary or appropriate in the public interest, and consistent with the protection of investors to extend the Unlinked Temporary Exemptions until February 5, 2018 to avoid any potential market disruption stemming from the application of certain existing Exchange Act provisions and rules to security-based swap activities. This approach also will provide the Commission with additional time to consider the potential impact of the revision of the Exchange Act definition of “security” on the scope of the Exchange Act provisions and rules applicable to security-based swaps, as well as the appropriateness of applying certain Exchange Act provisions and rules to security-based swap activities in light of the Commission's continuing rulemaking efforts.
Accordingly, pursuant to its authority under Section 36 of the Exchange Act,
the Commission believes it is necessary or appropriate in the public interest, and consistent with the protection of investors to extend the expiration of the Unlinked Temporary Exemptions until February 5, 2018.
III. Solicitation of Comments
The Commission is providing interested parties the opportunity to comment on whether any relief should be granted with respect to any specific Unlinked Temporary Exemption(s) beyond February 5, 2018. To the extent that interested parties request specific relief for any of the Unlinked Temporary Exemptions beyond February 5, 2018, any request should be detailed as to the circumstances in which the Exchange Act provision or rule applies to security-based swaps or security-based swap market participants, and why relief would be necessary.
Comments may be submitted by any of the following methods:
- Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F St. NE., Washington, DC 20549-1090.
All submissions should refer to File Number S7-27-11. This file number should be included on the subject line if email is used. To help us process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/exorders.shtml). Comments are also available for Web site viewing and printing in the Commission's Public Reference Room, 100 F St. NE., Washington, DC 20549 on official business days between the hours of 10 a.m. and 3 p.m. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly.
It is hereby ordered, pursuant to Section 36 of the Exchange Act, that the Unlinked Temporary Exemptions contained in the Exchange Act Exemptive Order and extended in the Extension Order in connection with the revisions of the Exchange Act definition of “security” to encompass security-based swaps are extended until February 5, 2018.
By the Commission.
Eduardo A. Aleman,
[FR Doc. 2017-01620 Filed 1-24-17; 8:45 am]
BILLING CODE 8011-01-P