In their latest
client memo, the Blank Rome law firm alerts directors and trustees of financial firms about their role in new swaps regulations. In particular, the firm puts public companies on notice that their boards must take action in order to take advantage of the CFTC's end-user exception. The end-user exception for swaps frees certain swaps transactions from the new requirement that all swaps be centrally cleared.
According to the client memo:
[I]f the party electing this exception is a public company, then to qualify, the company’s board or an appropriate committee of the board needs to review and approve the decision to enter into swaps that are exempt from the clearing requirements under the end-user exception.
The board's approval:
- can be done either on a general basis or on a swap-by-swap basis.
- should specifically state that the board or committee, as applicable, has approved the decision to enter into swaps that are not being cleared and are not executed on a designated contract market or swap execution facility and that the company will rely on the end-user exception.
In addition, in order to take advantage of the end-user exception, boards should make their approvals and adopt swaps policies governing the company’s use of swaps subject to the end-user exception prior to September 9, 2013. The memo further notes that the swap end-user policies adopted by the board should be reviewed at least annually, or more frequently if the company begins using swaps for other or different strategies than when the policies were first approved.