Recordkeeping and Reporting of Swap Information

February 3, 2012

As mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Commodity Futures Trading Commission (the “CFTC”) recently passed regulations to implement swap data recordkeeping and reporting requirements. A typical private fund that enters into swaps with a swap dealer will have a recordkeeping requirement but will not be subject to any reporting obligation.


A party to a swap that is not a swap dealer or major swap participant1 is required to keep full, complete and systematic records, including all pertinent data and memoranda, with respect to each swap to which it is a party for five years following final termination of the swap. These records may be in paper or electronic form, but must be readily accessible during the life of the swap and for two years thereafter, and must be retrievable from storage within three business days during the remaining three years. Most private funds that enter into swaps will not be swap dealers or major swap participants and will therefore be subject to these requirements. These recordkeeping requirements are effective for persons that are not swap dealers or major swap participants on the later of January 12, 2013 and 240 days from the CFTC’s publication of certain key terms.


One party to each swap will be responsible for reporting certain information to a registered swap data repository or, in certain circumstances, to the CFTC. A party that is not a swap dealer or a major swap participant, such as a typical private fund, will not have to report any information with respect to a swap where the counterparty is a swap dealer or a major swap participant. If neither party to a swap is a swap dealer or major swap participant, such as a swap between two private funds, the parties will determine who is responsible for reporting, unless only one party is a non-US person or is not a financial entity, in which case the US person or financial entity will have the reporting obligation. There are also exceptions to the reporting obligation if a swap between two parties, neither of which is a swap dealer or major swap participant, is cleared by a derivatives clearing organization.

If you have any questions regarding swap recordkeeping or reporting requirements or are considering entering into a swap with a party that is not a swap dealer or major swap participant, please contact Craig Hickernell (212-574-1399), Lauri Goodwyn (212-574-1249) or an attorney in the Investment Management Group at Seward & Kissel LLP.


1 In general, the term “swap dealer” means any person who (i) holds itself out as a dealer in swaps; (ii) makes a market is swaps; (iii) regularly enters into swaps with counterparties as an ordinary course of business for its own account; or (iv) engages in any activity causing the person to be commonly known in the trade as a dealer or market maker in swaps. In general, the term “major swap participant” means any person who is not a swap dealer and (i) maintains a substantial position in swaps for any of the major swap categories as determined by the CFTC; (ii) whose outstanding swaps create substantial counterparty exposure that could have serious adverse effects on the financial stability of the United States banking system or financial markets; or (iii) (I) is a financial entity that is highly leveraged relative to the amount of capital it holds and that is not subject to capital requirements established by an appropriate Federal banking agency and (II) maintains a substantial position in outstanding swaps in any major swap category, as determined by the CFTC. The CFTC is, however, still developing regulations to implement both of these definitions.