CFTC’s Division of Swap Dealer and Intermediary Oversight Issues Amended No-Action Letter on the Pay-to-Play Rules for Swap Dealers Conducting Business with Certain Governmental Special Entities

Washington, DC – The Commodity Futures Trading Commission’s (CFTC) Division of Swap Dealer and Intermediary Oversight (DSIO) today issued an amended no-action letter addressing the pay-to-play rules applicable to swap dealers who conduct business with certain governmental special entities. The letter has been amended from the original version that was issued on November 20, 2012.
The pay-to-play rules in Commission Regulation 23.451 restrict a swap dealer from engaging in certain activities with a governmental special entity, if the swap dealer (or a covered associate of the swap dealer) made or solicited contributions to an official of that governmental special entity during the preceding two years, with limited exceptions. The no-action letter provides relief to swap dealers and their covered associates for making certain contributions to officials of certain special entities that may otherwise fall within the scope of Commission Regulation 23.451.
The amended language in the no-action letter clarifies the scope of relief provided in the letter, making clear that no-action relief extends only to dealings with governmental plans that are not otherwise covered by the pay-to-play rules of the SEC and/or MSRB. The relief is intended to harmonize the CFTC’s pay-to-play rule with the restrictions in the SEC and or/ MSRB rules, and only extends to the degree necessary to harmonize the rule on this particular issue. The relief provided in the no-action letter does not affect the restrictions in place concerning dealings with other “governmental special entities,” as that term is defined in Regulation 23.451(a)(3), including to governmental plans that are covered by SEC and/or MSRB rules.
The relief provided in the no-action letter is applicable to all SDs and MSPs.
The letter also clarifies the scope of the two-year “look-back” period in Commission Regulation 23.451. Specifically, the letter states that the two-year “look-back” period does not include any time period that preceded the date on which an SD is required to register as such.

Last Updated: November 29, 2012