(a) Registration requirement. It shall be unlawful for any person to accept any money, securities,
or property (or to extend any credit in lieu of money, securities,
or property) from, for, or on behalf of a security-based swaps customer
to margin, guarantee, or secure a security-based swap cleared by or
through a clearing agency (including money, securities, or property
accruing to the customer as the result of such a security-based swap),
unless the person shall have registered under this title with the
Commission as a broker, dealer, or security-based swap dealer, and
the registration shall not have expired nor been suspended nor revoked.
(b) Cleared security-based swaps.
(1) Segregation required. A broker, dealer,
or security-based swap dealer shall treat and deal with all money,
securities, and property of any security-based swaps customer received
to margin, guarantee, or secure a security-based swap cleared by or
though a clearing agency (including money, securities, or property
accruing to the security-based swaps customer as the result of such
a security-based swap) as belonging to the security-based swaps customer.
(2) Commingling
prohibited. Money, securities, and property of a security-based
swaps customer described in paragraph (1) shall be separately accounted
for and shall not be commingled with the funds of the broker, dealer,
or security-based swap dealer or be used to margin, secure, or guarantee
any trades or contracts of any security-based swaps customer or person
other than the person for whom the same are held.
(c) Exceptions.
(1) Use of funds.
(A) In general. Notwithstanding subsection
(b), money, securities, and property of a security-based swaps customer
of a broker, dealer, or security-based swap dealer described in subsection
(b) may, for convenience, be commingled and deposited in the same
1 or more accounts with any bank or trust company or with a clearing
agency.
(B) Withdrawal. Notwithstanding subsection
(b), such share of the money, securities, and property described in
subparagraph (A) as in the normal course of business shall be necessary
to margin, guarantee, secure, transfer, adjust, or settle a cleared
security-based swap with a clearing agency, or with any member of
the clearing agency, may be withdrawn and applied to such purposes,
including the payment of commissions, brokerage, interest,
taxes, storage, and other charges, lawfully accruing in connection
with the cleared security-based swap.
(2) Commission
action. Notwithstanding subsection (b), in accordance with such
terms and conditions as the Commission may prescribe by rule, regulation,
or order, any money, securities, or property of the security-based
swaps customer of a broker, dealer, or security-based swap dealer
described in subsection (b) may be commingled and deposited as provided
in this section with any other money, securities, or property received
by the broker, dealer, or security-based swap dealer and required
by the Commission to be separately accounted for and treated and dealt
with as belonging to the security-based swaps customer of the broker,
dealer, or security-based swap dealer.
(d) Permitted investments. Money described
in subsection (b) may be invested in obligations of the United States,
in general obligations of any State or of any political subdivision
of a State, and in obligations fully guaranteed as to principal and
interest by the United States, or in any other investment that the
Commission may by rule or regulation prescribe, and such investments
shall be made in accordance with such rules and regulations and subject
to such conditions as the Commission may prescribe.
(e) Prohibition. It shall be unlawful for any
person, including any clearing agency and any depository institution,
that has received any money, securities, or property for deposit in
a separate account or accounts as provided in subsection (b) to hold,
dispose of, or use any such money, securities, or property as belonging
to the depositing broker, dealer, or security-based swap dealer or
any person other than the swaps customer of the broker, dealer, or
security-based swap dealer.
(f) Segregation
requirements for uncleared security-based swaps.
(1) Segregation
of assets held as collateral in uncleared security-based swap transactions.
(A) Notification. A security-based swap dealer
or major security-based swap participant shall be required to notify
the counterparty of the security-based swap dealer or major security-based
swap participant at the beginning of a security-based swap transaction
that the counterparty has the right to require segregation of the
funds of other property supplied to margin, guarantee, or secure the
obligations of the counterparty.
(B) Segregation and maintenance of funds. At the request of a counterparty to a security-based swap that provides
funds or other property to a security-based swap dealer or major security-based
swap participant to margin, guarantee, or secure the obligations of
the counterparty, the security-based swap dealer or major security-based
swap participant shall—
(i) segregate the funds or other property for the benefit of the
counterparty; and
(ii) in accordance
with such rules and regulations as the Commission may promulgate,
maintain the funds or other property in a segregated account separate
from the assets and other interests of the security-based swap dealer
or major security-based swap participant.
(2) Applicability. The requirements described in paragraph (1) shall—
(A) apply only to a security-based
swap between a counterparty and a security-based swap dealer or major
security-based swap participant that is not submitted for clearing
to a clearing agency; and
(B) (i) not apply to variation margin payments;
or
(ii) not preclude any commercial
arrangement regarding—
(I) the investment of segregated funds
or other property that may only be invested in such investments as
the Commission may permit by rule or regulation; and
(II) the related allocation of gains and
losses resulting from any investment of the segregated funds or other
property.
(3) Use of independent
third-party custodians. The segregated account described in paragraph
(1) shall be—
(A) carried
by an independent third-party custodian; and
(B) designated as a segregated account
for and on behalf of the counterparty.
(4) Reporting
requirement. If the counterparty does not choose to require segregation
of the funds or other property supplied to margin, guarantee, or secure
the obligations of the counterparty, the security-based swap dealer
or major security-based swap participant shall report to the counterparty
of the security-based swap dealer or major security-based swap participant
on a quarterly basis that the back office procedures of the security-based
swap dealer or major security-based swap participant relating to margin
and collateral requirements are in compliance with the agreement of
the counterparties.
(g) Bankruptcy. A security-based swap, as defined in section 3(a)(68)
shall be considered to be a security as such term is used in section
101(53A)(B) and subchapter III of title 11, United States Code. An
account that holds a security-based swap, other than a portfolio margining
account referred to in section 15(c)(3)(C) shall be considered to
be a securities account, as that term is defined in section 741 of
title 11, United States Code. The definitions of the terms “purchase”
and “sale” in section 3(a)(13) and (14) shall be applied to the terms
“purchase” and “sale”, as used in section 741 of title 11, United
States Code. The term “customer”, as defined in section 741 of title
11, United States Code, excludes any person, to the extent that such
person has a claim based on any open repurchase agreement, open reverse
repurchase agreement, stock borrowed agreement, non-cleared option,
or non-cleared security-based swap except to the extent of any margin
delivered to or by the customer with respect to which there is a customer
protection requirement under section 15(c)(3) or a segregation requirement.
[15 USC 78c-5. As added by act of July 21, 2010 (124 Stat.
1774).]
