The Securities Industry and Financial Markets Association, the International Swaps and Derivatives Association, Inc. and the Institute of International Bankers (collectively, Trade Associations) filed a complaint challenging the legality of the Commodity Futures Trading Commission’s Interpretive Guidance and Policy Statement Regarding Compliance With Certain Swap Regulations (Cross-Border Guidance) that was issued earlier this year.
The crux of the complaint is that the Cross-Border Guidance operates as a rule (even though it is not labeled as such) because it imposes mandatory requirements on swap market participants. Accordingly, the Trade Associations claim that the CFTC acted illegally when it issued the Cross-Border Guidance without adhering to the requirements of the Administrative Procedure Act (APA) and the Commodity Exchange Act (CEA) that apply to all formal CFTC rulemakings. The complaint further alleges that a number of CFTC rules that were adopted to give effect to Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Title VII Rules), including rules relating to the registration of swap dealers and swap execution facilities, mandatory clearing, and the process by which swaps will be deemed “made available to trade” were adopted in violation of the APA and CEA because the CFTC improperly failed to address the extraterritorial scope of those rulemakings.
Specifically, the complaint makes the following assertions:
- The Cross-Border Guidance and the Title VII Rules are invalid because the CFTC violated the CEA by failing to evaluate costs and benefits in enacting such guidance and rules.
- The Cross-Border Guidance and the Title VII Rules are invalid because the CFTC violated the APA by failing to provide interested persons sufficient opportunity to participate in the rulemaking.
- The CFTC violated the APA by failing to respond adequately to comments it received about the Cross Border Guidance and the Title VII Rules.
- The Cross-Border Guidance violates the APA because the CFTC acted arbitrarily and capriciously in determining the entities and transactions covered by the Guidance.
- The Cross-Border Guidance violates Section 2(i) of the CEA by improperly regulating activities outside the United States.
- The Title VII Rules violate the APA because the CFTC acted arbitrarily and capriciously in determining the entities and transactions covered by such regulations.
The Trade Associations have requested that the court vacate and set aside the Cross-Border Guidance and enjoin the CFTC from giving extraterritorial effect to the Title VII Rules.
A copy of the complaint is available here.