The Plain Meaning, Legislative Intent, and Policy Considerations of the Dodd-Frank Act: §715 - Authority to Prohibit International Participation in Swap Activities

Abstract

Under section 715 of the Act, “if the [CFTC] or the [SEC] determines that the regulation of swaps or security-based swaps markets in a foreign country undermines the stability of the United States financial system, either Commission, in consultation with the Secretary of the Treasury, may prohibit an entity domiciled in the foreign country from participating in the United States in any swap or security-based swap activities.” An important issue with this provision is the lack of a clear definition for an “entity domiciled in [a] foreign country.” This rule is counter-productive and should be replaced with one that would lead toward an international harmonization of derivative rules and regulations.