On January 11, 2012, the CFTC adopted final Dodd-Frank rules establishing the process for registration of swap dealers and major swap participants (MSPs) with the CFTC. As detailed in a CFTC fact sheet and Q&A, the final rules include provisional registration pending the effectiveness of final definitional rulemaking of the terms "swap dealer" and "major swap participant" under Dodd-Frank. The final rules also require swap dealers and MSPs to become and remain members of a registered futures association, such as the National Futures Association (NFA). Certain affiliates of insured depository institutions (IDIs) must register as swap dealers or MSPs under the rules.

Simultaneously with the final rules, the CFTC issued an order delegating to the NFA the authority to perform all registration functions for swap dealers and MSPs under the Dodd-Frank Act, including the processing of applications for registration and confirmation of initial compliance with applicable new Commodity Exchange Act (CEA) Section 4s regulations added by Dodd-Frank, which cover the registration requirements.

Because the CFTC has not yet issued rules defining which entities are captured by Dodd-Frank definitions of the terms "swap dealer" and "major swap participant," it is currently unclear exactly which entities must register under the new rules. As a result, and as part of the final rules, the CFTC has established provisional registration procedures for a transitional period lasting until the effective dates of the rules defining the terms "swap dealer" and "major swap participant." During the provisional registration period, entities that believe they are swap dealers or MSPs will be permitted, but not required, to register as such with the CFTC. Registration will only become mandatory once the definitional rules become effective.

The final rules prohibit any swap dealer or MSP from permitting any person associated with it that is not eligible under Sections 8a(2) or 8a(3) of the CEA to effect or be involved in effecting swaps on its behalf if the swap dealer or MSP knows, or in the exercise of reasonable care should know, that the entity is not eligible. The final rules provide a limited exception to this prohibition for any person associated with a swap dealer or MSP that has been duly listed as a principal or registered as an associated person of another registrant (such as a futures commission merchant (FCM), commodity pool operator (CPO) or commodity trading advisor (CTA)) notwithstanding that the person is ineligible under these sections of the CEA.

To apply for registration as a swap dealer or MSP, an entity must file a Form 7-R and, for each of its principal persons (defined as officers, directors and 10% shareholders), a Form 8-R and a fingerprint card. Principal persons must also demonstrate compliance with each Section 4s regulation then applicable to it, as well as any other Section 4s regulation that may become applicable to it.

The final rules take effect 60 days after publication in the Federal Register.

For more information on the regulation of swap dealers and MSPs, see Practice Note, Summary of the Dodd-Frank Act: Swaps and Derivatives: Requirements for Swap Dealers and Major Swap Participants (MSPs). For more information on CFTC rulemaking activities implementing the Dodd-Frank Act, see Practice Note, Road Map to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.