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112th Congress                                            Rept. 112-477
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 1

======================================================================



 
                    SWAP JURISDICTION CERTAINTY ACT

                                _______


                  May 11, 2012.--Ordered to be printed

                                _______


  Mr. Bachus, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 3283]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 3283) to amend the Commodity Exchange Act and 
the Securities Exchange Act of 1934 to provide an exemption for 
certain swaps and security-based swaps involving non-U.S. 
persons, and for other purposes, having considered the same, 
reports favorably thereon with an amendment and recommend that 
the bill as amended do pass.
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Swap Jurisdiction Certainty Act''.

SEC. 2. COMMODITY EXCHANGE ACT.

  Section 4s(a) of the Commodity Exchange Act (7 U.S.C. 6s(a)) is 
amended by adding at the end the following:
          ``(3) Extra-territorial swap transaction application of title 
        vii.--
                  ``(A) In general.--A swap entered into between--
                          ``(i) a swap dealer that is registered with 
                        the Commission who is either--
                                  ``(I) a U.S. person, or
                                  ``(II) a person that has a parent 
                                company that is a U.S. person, and
                          ``(ii) a person who is--
                                  ``(I) a U.S. or non-U.S. subsidiary, 
                                branch, or affiliate of such swap 
                                dealer, or
                                  ``(II) any other non-U.S. person that 
                                is not registered as a swap dealer with 
                                the Commission,
                shall not be subject to the provisions of title VII of 
                the Dodd-Frank Wall Street Reform and Consumer 
                Protection Act, and of amendments added by such title, 
                so long as each swap dealer described under clause (i) 
                reports such swap to a swap data repository registered 
                with the Commission.
                  ``(B) Swaps entered into by registered non-u.s. 
                persons.--
                          ``(i) In general.--A non-U.S. person that 
                        registers as a swap dealer with the Commission 
                        shall only be subject to the requirements of 
                        title VII of the Dodd-Frank Wall Street Reform 
                        and Consumer Protection Act, and of amendments 
                        added by such title, with respect to swaps that 
                        such person enters into with a U.S. person who 
                        is not a U.S. subsidiary, branch, or affiliate 
                        of such non-U.S. person.
                          ``(ii) Capital requirements.--A non-U.S. 
                        person that registers as a swap dealer with the 
                        Commission shall be permitted by the Commission 
                        to comply with the capital requirements under 
                        subsection (e) by complying with comparable 
                        requirements established by the appropriate 
                        governmental authorities in the home country of 
                        the non-U.S. person, so long as such home 
                        country is a signatory to the Basel Accords.
                  ``(C) Non-U.S. person.--For purposes of this 
                paragraph, the term `non-U.S. person' includes--
                          ``(i) any person that is not a U.S. person;
                          ``(ii) any discretionary account or similar 
                        account (other than an estate or trust) held 
                        for the benefit or account of a non-U.S. person 
                        by a dealer or other professional fiduciary 
                        organized, incorporated, or (if an individual) 
                        resident in the United States;
                          ``(iii) any agency or branch of a U.S. person 
                        located outside the United States if--
                                  ``(I) the agency or branch operates 
                                for valid business reasons; and
                                  ``(II) the agency or branch is 
                                engaged in the business of insurance or 
                                banking and is subject to substantive 
                                insurance or banking regulation, 
                                respectively, in the jurisdiction where 
                                it is located;
                          ``(iv) any trust of which any professional 
                        fiduciary acting as trustee is a U.S. person, 
                        if--
                                  ``(I) a trustee who is a non-U.S. 
                                person has sole or shared investment 
                                discretion with respect to the trust 
                                assets; and
                                  ``(II) no beneficiary of the trust 
                                (and no settlor if the trust is 
                                revocable) is a U.S. person;
                          ``(v) an employee benefit plan established 
                        and administered in accordance with the law, 
                        customary practices, and documentation of a 
                        country other than the United States; and
                          ``(vi) the International Monetary Fund, the 
                        International Bank for Reconstruction and 
                        Development, the Inter-American Development 
                        Bank, the Asian Development Bank, the African 
                        Development Bank, the United Nations, a central 
                        bank or its functional equivalent which is 
                        located in a non-U.S. jurisdiction and that is 
                        a signatory to the Basel Accords, and their 
                        agencies, affiliates and pension plans, and any 
                        other similar international organizations, 
                        their agencies, affiliates and pension plans.
                  ``(D) U.S. person.--For purposes of this paragraph, 
                the term `U.S. person' includes--
                          ``(i) any natural person resident in the 
                        United States;
                          ``(ii) any partnership or corporation 
                        organized or incorporated under the laws of the 
                        United States;
                          ``(iii) any estate of which any executor or 
                        administrator is a U.S. person;
                          ``(iv) any trust of which any trustee is a 
                        U.S. person;
                          ``(v) any agency or branch of a foreign 
                        entity located in the United States;
                          ``(vi) any non-discretionary account or 
                        similar account (other than an estate or trust) 
                        held by a dealer or other fiduciary for the 
                        benefit or account of a United States person;
                          ``(vii) any discretionary account or similar 
                        account (other than an estate or trust) held by 
                        a dealer or other fiduciary organized, 
                        incorporated, or (if an individual) resident in 
                        the United States; and
                          ``(viii) any partnership or corporation--
                                  ``(I) organized or incorporated under 
                                the laws of any foreign jurisdiction; 
                                and
                                  ``(II) formed by a U.S. person 
                                principally for the purpose of 
                                investing in securities not registered 
                                under the Securities Act of 1933, 
                                unless it is organized or incorporated, 
                                and owned, by accredited investors (as 
                                such term is defined under section 
                                230.501 of title 17, Code of Federal 
                                Regulations) that are not natural 
                                persons, estates, or trusts.
                  ``(E) Anti-evasion.--Notwithstanding any other 
                provision of this paragraph, each registered swap 
                dealer shall be subject to the provision under section 
                2(i)(2).''.

SEC. 3. SECURITIES EXCHANGE ACT OF 1934.

  Section 15F(a) of the Securities Exchange Act of 1934 (78o-10(a)) is 
amended by adding at the end the following:
          ``(3) Extra-territorial swap transaction application of title 
        vii.--
                  ``(A) In general.--A security-based swap entered into 
                between--
                          ``(i) a security-based swap dealer that is 
                        registered with the Commission who is either--
                                  ``(I) a U.S. person, or
                                  ``(II) a person that has a parent 
                                company that is a U.S. person, and
                          ``(ii) a person who is a U.S. or non-U.S. 
                        subsidiary, branch, affiliate, or parent 
                        company of such security-based swap dealer,
                shall not be subject to the provisions of title VII of 
                the Dodd-Frank Wall Street Reform and Consumer 
                Protection Act, and of amendments added by such title, 
                so long as each security-based swap dealer described 
                under clause (i) reports such security-based swap to a 
                security-based swap data repository registered with the 
                Commission.
                  ``(B) Security-based swaps entered into by registered 
                non-u.s. persons.--
                          ``(i) In general.--A non-U.S. person that 
                        registers as a security-based swap dealer with 
                        the Commission shall only be subject to the 
                        requirements of title VII of the Dodd-Frank 
                        Wall Street Reform and Consumer Protection Act, 
                        and of amendments added by such title, with 
                        respect to security-based swaps that such 
                        person enters into with a U.S. person who is 
                        not a U.S. subsidiary, branch, or affiliate of 
                        such non-U.S. person.
                          ``(ii) Capital requirements.--A non-U.S. 
                        person that registers as a security-based swap 
                        dealer with the Commission shall be permitted 
                        by the Commission to comply with the capital 
                        requirements under subsection (e) by complying 
                        with comparable requirements established by the 
                        appropriate governmental authorities in the 
                        home country of the non-U.S. person, so long as 
                        such home country is a signatory to the Basel 
                        Accords.
                  ``(C) Non-U.S. person.--For purposes of this 
                paragraph, the term `non-U.S. person' includes--
                          ``(i) any person that is not a U.S. person;
                          ``(ii) any discretionary account or similar 
                        account (other than an estate or trust) held 
                        for the benefit or account of a non-U.S. person 
                        by a dealer or other professional fiduciary 
                        organized, incorporated, or (if an individual) 
                        resident in the United States;
                          ``(iii) any agency or branch of a U.S. person 
                        located outside the United States if--
                                  ``(I) the agency or branch operates 
                                for valid business reasons; and
                                  ``(II) the agency or branch is 
                                engaged in the business of insurance or 
                                banking and is subject to substantive 
                                insurance or banking regulation, 
                                respectively, in the jurisdiction where 
                                it is located;
                          ``(iv) any trust of which any professional 
                        fiduciary acting as trustee is a U.S. person, 
                        if--
                                  ``(I) a trustee who is a non-U.S. 
                                person has sole or shared investment 
                                discretion with respect to the trust 
                                assets; and
                                  ``(II) no beneficiary of the trust 
                                (and no settlor if the trust is 
                                revocable) is a U.S. person;
                          ``(v) an employee benefit plan established 
                        and administered in accordance with the law, 
                        customary practices, and documentation of a 
                        country other than the United States; and
                          ``(vi) the International Monetary Fund, the 
                        International Bank for Reconstruction and 
                        Development, the Inter-American Development 
                        Bank, the Asian Development Bank, the African 
                        Development Bank, the United Nations, a central 
                        bank or its functional equivalent which is 
                        located in a non-U.S. jurisdiction and that is 
                        a signatory to the Basel Accords, and their 
                        agencies, affiliates and pension plans, and any 
                        other similar international organizations, 
                        their agencies, affiliates and pension plans.
                  ``(D) U.S. person.--For purposes of this paragraph, 
                the term `U.S. person' includes--
                          ``(i) any natural person resident in the 
                        United States;
                          ``(ii) any partnership or corporation 
                        organized or incorporated under the laws of the 
                        United States;
                          ``(iii) any estate of which any executor or 
                        administrator is a U.S. person;
                          ``(iv) any trust of which any trustee is a 
                        U.S. person;
                          ``(v) any agency or branch of a foreign 
                        entity located in the United States;
                          ``(vi) any non-discretionary account or 
                        similar account (other than an estate or trust) 
                        held by a dealer or other fiduciary for the 
                        benefit or account of a United States person;
                          ``(vii) any discretionary account or similar 
                        account (other than an estate or trust) held by 
                        a dealer or other fiduciary organized, 
                        incorporated, or (if an individual) resident in 
                        the United States; and
                          ``(viii) any partnership or corporation--
                                  ``(I) organized or incorporated under 
                                the laws of any foreign jurisdiction; 
                                and
                                  ``(II) formed by a U.S. person 
                                principally for the purpose of 
                                investing in securities not registered 
                                under the Securities Act of 1933, 
                                unless it is organized or incorporated, 
                                and owned, by accredited investors (as 
                                such term is defined under section 
                                230.501 of title 17, Code of Federal 
                                Regulations) that are not natural 
                                persons, estates, or trusts.
                  ``(E) Anti-evasion.--Notwithstanding any other 
                provision of this paragraph, a registered security-
                based swap dealer shall not conduct any activities that 
                are designed to evade any provision of this Act that 
                was enacted by the Wall Street Transparency and 
                Accountability Act of 2010.
                  ``(F) Preservation of authority.--Nothing in this 
                paragraph shall--
                          ``(i) exempt a transaction described in this 
                        paragraph from section 23A or 23B of the 
                        Federal Reserve Act, or implementing 
                        regulations thereunder; or
                          ``(ii) affect the authorities of the 
                        prudential regulators over the institutions 
                        described under subparagraphs (A) through (E) 
                        of section 1a(39) of the Commodity Exchange Act 
                        (7 U.S.C. 1a(39)) as those authorities are 
                        established in law, other than under title VII 
                        of the Dodd-Frank Wall Street Reform and 
                        Consumer Protection Act and amendments made by 
                        such title.''.

                          Purpose and Summary

    H.R. 3283, the ``Swap Jurisdiction Certainty Act,'' 
clarifies Congress's intent in limiting the extraterritorial 
application of Title VII of the Dodd-Frank Wall Street Reform 
and Consumer Protection Act (P.L. 111-203). H.R. 3283 makes 
clear that (1) Title VII's capital requirements do not apply to 
non-U.S. swap dealers as long as the non-U.S. swap dealer's 
home country is a signatory to the Basel Capital Accords; (2) 
swap transactions between swap dealers and their affiliates are 
subject only to Title VII's reporting requirements; and (3) 
swap transactions between non-U.S. swap dealers and non-U.S. 
persons are outside the scope of Title VII's transaction-level 
requirements. H.R. 3283 also strengthens the anti-evasion 
authority of the U.S. Securities and Exchange Commission (SEC) 
and preserves the prudential regulators' non-Title VII 
authority over security-based swap dealers. A broad application 
of Title VII's requirements to transactions that take place 
outside the United States and to non-U.S. entities could weaken 
the U.S. financial system and place U.S. financial institutions 
at a competitive disadvantage against their foreign 
counterparts. The clarifications set forth in H.R. 3283 will 
mitigate these potential negative effects.

                  Background and Need for Legislation

    Title VII of the Dodd-Frank Act seeks to regulate the over-
the-counter derivatives (OTC) market in the same way that 
equities and futures exchanges are regulated. Because the OTC 
market is global, Title VII gives rise to questions about the 
extent to which U.S. regulations will apply to swap and 
security-based swap transactions that take place outside of the 
United States. Title VII's plain language makes clear that 
Congress intended it to apply outside the United States only in 
certain limited circumstances. Section 722 provides that 
provisions relating to swaps will not apply to activities 
outside the United States unless those activities (1) have a 
direct and significant connection with activities in, or effect 
on, commerce of the United States or (2) contravene anti-
evasion rules promulgated by the Commodity Futures Trading 
Commission (CFTC). Section 772 provides that the provisions 
related to security-based swaps will not apply to a financial 
institution transacting business outside of the United States 
unless that institution transacts business in security-based 
swaps in contravention of the SEC's anti-evasion rules or 
regulations.
    Despite Congress's intent that the extraterritorial 
application of Title VII be limited, the comments and actions 
of U.S. regulators indicate that they are considering 
regulations that would result in Title VII's being applied far 
more broadly than Congress intended. For example, U.S. 
regulators have proposed margin rules that would apply to the 
foreign subsidiaries of U.S. swap dealers that enter into swaps 
with foreign counterparties, notwithstanding that these 
transactions have no connection to the United States. These 
proposed margin rules prompted a letter from Ranking Member 
Barney Frank and Senate Banking Committee Chairman Tim Johnson 
to Federal regulators, in which they wrote that ``Congress 
generally limited the territorial scope of Title VII to 
activities within the United States.'' Ranking Member Frank and 
Senator Johnson noted that they were ``concerned that the 
proposed imposition of margin requirements, in addition to 
provisions related to clearing, trading, registration, and the 
treatment of foreign subsidiaries of U.S. institutions, all 
raise questions about consistency with Congressional intent 
regarding Title VII.''\1\
---------------------------------------------------------------------------
    \1\Letter from Sen. Tim Johnson and Rep. Barney Frank to CFTC 
Chairman Gary Gensler, Federal Reserve Chairman Ben S. Bernanke, SEC 
Chairman Mary L. Schapiro, and Federal Deposit Insurance Corporation 
Acting Chairman Martin J. Gruenberg (Oct. 4, 2011).
---------------------------------------------------------------------------
    The broad extraterritorial application of Title VII 
contemplated by U.S. regulators would have significant negative 
effects. Requiring non-U.S. entities to comply with Title VII 
solely because they are affiliates or subsidiaries of U.S. 
companies would result in dual--and potentially inconsistent--
regulation because the country in which the subsidiary is 
located would also have jurisdiction over the non-U.S. entity 
and its transactions. Avoiding conflicting U.S. and foreign 
regulations is particularly important when both the U.S. and 
the foreign jurisdiction require that swaps and security-based 
swaps by cleared. If both the U.S. and the foreign regulator 
require that swaps be cleared at locally regulated 
clearinghouses, but there is no clearinghouse registered in 
both jurisdictions that can clear the swap, it will be 
impossible for the non-U.S. entity to comply with both the U.S. 
and the foreign regulation. Applying Title VII's regulations to 
a non-U.S. entity solely because it is affiliated with a U.S. 
company will disadvantage U.S. companies and their non-U.S. 
operations, particularly if the foreign jurisdiction in which 
the non-U.S. entity is operating does not have similar rules or 
if it is still developing its OTC swaps rules, which is 
currently the case in most foreign jurisdictions.
    The application of Title VII's capital requirements to 
foreign institutions that operate in the United States has also 
raised concerns about the negative effects that broadly 
applying Title VII would have on financial markets. When a 
financial institution is incorporated in one country (the home 
country) but does business in another (the host country), the 
home country regulator is charged with setting prudential 
standards and regulating that institution. If the host country 
regulator also seeks to regulate the institution, the 
institution may be subject to overlapping and inconsistent 
regulation. Under Title VII, a financial institution 
incorporated abroad but doing business in the U.S. that 
registers in the U.S. as a swap dealer will be subject to Title 
VII's capital requirements, even though that institution is 
already subject to the capital requirements established by its 
home country regulator.
    Dual regulation resulting from a broad application of Title 
VII to foreign financial institutions may prompt them to spin 
off their U.S. affiliates as separate U.S. legal entities to 
avoid conflicting regulatory requirements. But the creation of 
separate U.S. institutions to comply with Title VII's 
requirements could have negative and costly consequences for 
foreign firms and their customers. For example, a foreign 
institution that finds itself compelled to maintain a separate 
U.S. institution could lose the benefits of netting, collateral 
management, and centralized risk management across that 
institution's global operations. In turn, the fragmentation of 
foreign global institutions into a foreign institution and a 
separately-maintained U.S. subsidiary could increase the 
exposure of U.S. customers and the U.S. financial system to 
systemic risk: U.S. customers would find themselves transacting 
business with a thinly-capitalized U.S. subsidiary rather than 
a well-capitalized global financial institution with a large 
balance sheet and centralized risk management. Alternatively, 
foreign institutions could cease their U.S. swap operations 
altogether, which would reduce liquidity in U.S. financial 
markets, increase transaction costs for U.S. end-users, and 
impede U.S. economic growth. Apart from these effects in U.S. 
markets, a broad application of Title VII's capital 
requirements to foreign institutions may cause foreign 
regulators to retaliate against the foreign subsidiaries of 
U.S. financial institutions by imposing their own regulations.
    To mitigate the potential negative effects that would 
result from a broad extraterritorial application of Title VII, 
Representatives Jim Himes and Scott Garrett introduced H.R. 
3283, the ``Swap Jurisdiction Certainty Act,'' on October 31, 
2011. The Subcommittee on Capital Markets and Government 
Sponsored Enterprises held a legislative hearing on H.R. 3283 
on February 8, 2012. During that hearing, the Subcommittee 
received testimony from a variety of financial market 
participants, many of whom expressed concerns about the 
potential negative effects that a broad extraterritorial 
application of Title VII would have. For example, Don Thompson, 
Managing Director & Associate General Counsel, JPMorgan Chase & 
Co., testified that ``[a]n overreaching application of Dodd-
Frank would severely impact U.S. competitiveness and actually 
increase risk when a robust regulatory framework already exists 
and there are other safeguards that could be adopted without 
creating an unlevel playing field for our banks.'' Chris Allen, 
Managing Director, Barclays Capital, testified on behalf of the 
Institute of International Bankers, and stated that broad 
extraterritorial application of Title VII ``would lead to the 
very duplicative and conflicting regulation that the G-20 
intended to avoid . . . [which] would place foreign firms with 
ties to the U.S.--both those firms headquartered abroad that 
choose to do business in the U.S. and the foreign affiliates of 
U.S. firms--at a competitive disadvantage as they conduct 
business around the globe.'' Luke Zubrod, Director, Chatham 
Financial, testified on behalf of the Coalition of Derivatives 
End-Users about the effects on end-users, and concluded that 
``expansive extraterritorial application of Title VII could 
undermine end users' ability to manage risk efficiently, both 
when they transact domestically and abroad.''

                                Hearing

    On February 8, 2012, the Subcommittee on Capital Markets 
and Government Sponsored Enterprises held a hearing titled 
``Limiting the Extraterritorial Impact of Title VII of the 
Dodd-Frank Act'' to consider the merits of H.R. 3283. This was 
a one-panel hearing with the following witnesses:
     Mr. Chris Allen, Managing Director, Barclays 
Capital
     Dr. Chris Brummer, Professor of Law, Georgetown 
University
     Mr. Don Thompson, Managing Director and Associate 
General Counsel, JPMorgan Chase & Co.
     Mr. Luke Zubrod, Director, Chatham Financial

                        Committee Consideration

    The Committee on Financial Services met in open session on 
March 27, 2012, and ordered H.R. 3283, as amended, favorably 
reported to the House by a record vote of 41 yeas and 18 nays 
(Record vote no. FC-68).

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. A 
motion by Chairman Bachus to report the bill, as amended, to 
the House with a favorable recommendation was agreed to by a 
record vote of 41 yeas and 18 nays (Record vote no. FC-68). The 
names of Members voting for and against follow:

                                              Record vote no. FC-68
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Bachus.....................        X   ........  .........  Mr. Frank (MA)...  ........        X   .........
Mr. Hensarling.................        X   ........  .........  Ms. Waters.......  ........        X   .........
Mr. King (NY)..................        X   ........  .........  Mrs. Maloney.....  ........        X   .........
Mr. Royce......................        X   ........  .........  Mr. Gutierrez....  ........        X   .........
Mr. Lucas......................        X   ........  .........  Ms. Velazquez....  ........        X   .........
Mr. Paul.......................  ........  ........  .........  Mr. Watt.........  ........        X   .........
Mr. Manzullo...................        X   ........  .........  Mr. Ackerman.....  ........        X   .........
Mr. Jones......................  ........  ........  .........  Mr. Sherman......  ........        X   .........
Mrs. Biggert...................        X   ........  .........  Mr. Meeks........        X   ........  .........
Mr. Gary G. Miller (CA)........        X   ........  .........  Mr. Capuano......  ........        X   .........
Mrs. Capito....................        X   ........  .........  Mr. Hinojosa.....  ........        X   .........
Mr. Garrett....................        X   ........  .........  Mr. Clay.........        X   ........  .........
Mr. Neugebauer.................        X   ........  .........  Mrs. McCarthy            X   ........  .........
                                                                 (NY).
Mr. McHenry....................        X   ........  .........  Mr. Baca.........        X   ........  .........
Mr. Campbell...................        X   ........  .........  Mr. Lynch........  ........        X   .........
Mrs. Bachmann..................        X   ........  .........  Mr. Miller (NC)..  ........        X   .........
Mr. McCotter...................        X   ........  .........  Mr. David Scott          X   ........  .........
                                                                 (GA).
Mr. McCarthy (CA)..............        X   ........  .........  Mr. Al Green (TX)  ........        X   .........
Mr. Pearce.....................        X   ........  .........  Mr. Cleaver......  ........        X   .........
Mr. Posey......................        X   ........  .........  Ms. Moore........  ........        X   .........
Mr. Fitzpatrick................        X   ........  .........  Mr. Ellison......  ........        X   .........
Mr. Westmoreland...............        X   ........  .........  Mr. Perlmutter...        X   ........  .........
Mr. Luetkemeyer................        X   ........  .........  Mr. Donnelly.....  ........        X   .........
Mr. Huizenga...................        X   ........  .........  Mr. Carson.......  ........        X   .........
Mr. Duffy......................        X   ........  .........  Mr. Himes........        X   ........  .........
Ms. Hayworth...................        X   ........  .........  Mr. Peters.......        X   ........  .........
Mr. Renacci....................        X   ........  .........  Mr. Carney.......        X   ........  .........
Mr. Hurt.......................        X
Mr. Dold.......................        X
Mr. Schweikert.................        X
Mr. Grimm......................        X
Mr. Canseco....................        X
Mr. Stivers....................        X
Mr. Fincher....................        X
----------------------------------------------------------------------------------------------------------------

    During consideration of H.R. 3283 by the Committee, the 
following amendment was considered:
    1. An amendment offered by Mr. Frank, no. 4, to preserve 
the prudential regulators' authority to subject securities-
based swap dealers to prudential and other rules besides those 
issued under Title VII of the Dodd-Frank Act, and to give the 
SEC and CFTC the authority to regulate offshore swaps if they 
jointly determine that such regulation is needed to prevent the 
importation of systemic risk into the United States; to avoid 
threats to the financial stability of the United States; or to 
prevent evasion of U.S. laws or regulations, was not agreed to 
by a record vote of 26 yeas and 32 nays (Record vote no. FC-
67).

                                              Record vote no. FC-67
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Bachus.....................  ........        X   .........  Mr. Frank (MA)...        X   ........  .........
Mr. Hensarling.................  ........        X   .........  Ms. Waters.......        X   ........  .........
Mr. King (NY)..................  ........        X   .........  Mrs. Maloney.....        X   ........  .........
Mr. Royce......................  ........        X   .........  Mr. Gutierrez....        X   ........  .........
Mr. Lucas......................  ........        X   .........  Ms. Velazquez....        X   ........  .........
Mr. Paul.......................  ........  ........  .........  Mr. Watt.........        X   ........  .........
Mr. Manzullo...................  ........        X   .........  Mr. Ackerman.....        X   ........  .........
Mr. Jones......................  ........  ........  .........  Mr. Sherman......        X   ........  .........
Mrs. Biggert...................  ........        X   .........  Mr. Meeks........        X   ........  .........
Mr. Gary G. Miller (CA)........  ........        X   .........  Mr. Capuano......        X   ........  .........
Mrs. Capito....................  ........        X   .........  Mr. Hinojosa.....        X   ........  .........
Mr. Garrett....................  ........        X   .........  Mr. Clay.........        X   ........  .........
Mr. Neugebauer.................  ........        X   .........  Mrs. McCarthy            X   ........  .........
                                                                 (NY).
Mr. McHenry....................  ........        X   .........  Mr. Baca.........        X   ........  .........
Mr. Campbell...................  ........        X   .........  Mr. Lynch........        X   ........  .........
Mrs. Bachmann..................  ........        X   .........  Mr. Miller (NC)..        X   ........  .........
Mr. McCotter...................  ........        X   .........  Mr. David Scott          X   ........  .........
                                                                 (GA).
Mr. McCarthy (CA)..............  ........        X   .........  Mr. Al Green (TX)  ........  ........  .........
Mr. Pearce.....................  ........        X   .........  Mr. Cleaver......        X   ........  .........
Mr. Posey......................  ........        X   .........  Ms. Moore........        X   ........  .........
Mr. Fitzpatrick................  ........        X   .........  Mr. Ellison......        X   ........  .........
Mr. Westmoreland...............  ........        X   .........  Mr. Perlmutter...        X   ........  .........
Mr. Luetkemeyer................  ........        X   .........  Mr. Donnelly.....        X   ........  .........
Mr. Huizenga...................  ........        X   .........  Mr. Carson.......        X   ........  .........
Mr. Duffy......................  ........        X   .........  Mr. Himes........        X   ........  .........
Ms. Hayworth...................  ........        X   .........  Mr. Peters.......        X   ........  .........
Mr. Renacci....................  ........        X   .........  Mr. Carney.......        X   ........  .........
Mr. Hurt.......................  ........        X   .........
Mr. Dold.......................  ........        X   .........
Mr. Schweikert.................  ........        X   .........
Mr. Grimm......................  ........        X   .........
Mr. Canseco....................  ........        X   .........
Mr. Stivers....................  ........        X   .........
Mr. Fincher....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    The following amendments and motion were also considered by 
the Committee:
    1. An amendment offered by Mr. Miller of N.C., no. 1, to 
require security-based swap dealers registered with the SEC to 
maintain margin and capital equal to the difference between the 
U.S. requirements for margin and capital and the requirements 
of the foreign jurisdiction where the counterparty is located, 
was offered and withdrawn.
    2. An amendment offered by Mr. Himes, no. 2, as amended by 
unanimous consent, to preserve the SEC's authority to regulate 
security-based swaps between U.S. security-based swap dealers 
and foreign counterparties, was agreed to by voice vote.
    3. An amendment offered by Messrs. Garrett and Frank, no. 
3, to preserve the prudential regulators' authority to subject 
securities-based swap dealers to prudential and other rules 
besides those issued under Title VII of the Dodd-Frank Act, was 
agreed to by voice vote.
    4. A motion offered by Mr. Garrett to move the previous 
question on H.R. 3283 was agreed to by voice vote.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee has held hearings and 
made findings that are reflected in this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    The objective of H.R. 3283, the ``Swap Jurisdiction 
Certainty Act'' is to clarify Congress's intent in limiting the 
extraterritorial application of Title VII of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act (P.L. 111-203). 
H.R. 3283 clarifies that (1) Title VII's capital requirements 
do not apply to non-U.S. swap dealers as long as the non-U.S. 
swap dealer's home country is a signatory to the Basel Capital 
Accord; (2) swap transactions between swap dealers and their 
affiliates are subject only to Title VII's reporting 
requirements; and (3) swap transactions between non-U.S. swap 
dealers and non-U.S. persons are outside the scope of Title 
VII's transaction-level requirements.
    H.R. 3283 will strengthen the SEC's anti-evasion authority 
and preserve the prudential regulators' non-Title VII authority 
over security-based swap dealers. H.R. 3283 will mitigate the 
potential negative effects that would result from a broad 
extraterritorial application of Title VII, which could weaken 
the U.S. financial system and place U.S. financial institutions 
at a competitive disadvantage against their foreign 
counterparts.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:
                                                    April 27, 2012.
Hon. Spencer Bachus,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3283, the Swap 
Jurisdiction Certainty Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Swan Willie.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

H.R. 3283--Swap Jurisdiction Certainty Act

    The Dodd-Frank Wall Street Reform and Consumer Protection 
Act (Public Law 111-203) requires that participants in swap 
transactions meet certain clearing, reporting, and margin 
requirements as well as certain standards of business conduct. 
(A swap is a contract that calls for an exchange of cash 
between two participants based on an underlying rate or index, 
or the performance of an asset.)
    H.R. 3283 would exempt from those requirements swap 
transactions entered into between a registered swap dealer that 
is a U.S. company or the affiliate of a U.S. company and:
           The dealer's U.S. or foreign affiliate or a 
        foreign company that is not registered with the 
        Commodity Futures Trading Commission (CFTC), in the 
        case of commodity-based transactions; or
           The dealer's U.S. or foreign affiliate, in 
        the case of securities-based transactions.
    Further, H.R. 3283 would specify that capital, reporting, 
and margin requirements apply to swap transactions between 
foreign swap dealers that are registered with the CFTC (or the 
Securities and Exchange Commission (SEC) in the case of 
securities-based swap transactions) and a U.S. company that is 
not an affiliate of the dealer. H.R. 3283 also would allow 
foreign swap dealers to meet the capital requirements of their 
home country so long as the country is a signatory to certain 
international banking regulations (known as the Basel Accords).
    Both the CFTC and the SEC are developing regulations 
relating to swap transactions including margin, clearing, and 
reporting requirements as well as standards of conduct for swap 
dealers. Some of these rules have been adopted while many more 
are in earlier stages of the regulatory process. Based on 
information from the two agencies, CBO estimates that 
incorporating the provisions of H.R. 3283 at this point would 
not require a significant increase in the workload of either 
agency. Therefore, CB0 estimates that any change in 
discretionary spending to implement the legislation, which 
would be subject to the availability of appropriated funds, 
would not be significant (less than $500,000). Further, the SEC 
is authorized to collect fees sufficient to offset its annual 
appropriation; therefore, CBO estimates that the net cost to 
the SEC to implement H.R. 3283 would be negligible, assuming 
appropriation actions consistent with the agency's authorities. 
Enacting H.R. 3283 would not affect direct spending or 
revenues; therefore, pay-as-you-go procedures do not apply.
    H.R. 3283 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would impose no costs on state, local, or tribal governments.
    The CBO staff contact for this estimate is Susan Willie. 
The estimate was approved by Theresa Gullo, Deputy Assistant 
Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of the section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    H.R. 3283 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    The short title of the Act is the ``Swap Jurisdiction 
Certainty Act.''

Section 2. Commodity Exchange Act

    This section clarifies that swap transactions between U.S. 
swap dealers and their affiliates as well as swap transactions 
between U.S. swap dealers and non-U.S. institutions are subject 
to Title VII's reporting requirements, but not to Title VII's 
other transaction-level requirements.
    This section also provides that a non-U.S. person that 
registers as a swap dealer is subject to Title VII's 
requirements only for swaps that person enters into with a U.S. 
person who is not a U.S. subsidiary, branch, or affiliate of 
such non-U.S. person.
    This section also clarifies that Title VII's capital 
requirements do not apply to a non-U.S. person registered as a 
swap dealer as long as the non-U.S. person's home country is a 
signatory to the Basel Capital Accord.
    This section also defines ``U.S. Person'' and ``non-U.S. 
person'' by adopting the definitions set forth in SEC 
Regulation S (17 CFR 230.901 et seq.), which provides an 
exclusion from the registration requirements of the Securities 
Act of 1933 for offerings made outside the United States by 
U.S. and foreign issuers, and by adding ``a central bank or its 
functional equivalent which is located in a non-U.S. 
jurisdiction and that is a signatory to the Basel Accords'' to 
the definition of a ``non-U.S. person.''

Section 3. Securities Exchange Act of 1934

    This section clarifies that security-based swap 
transactions between U.S. security-based swap dealers and their 
affiliates are subject to Title VII's reporting requirements, 
but are not subject to Title VII's other transaction-level 
requirements.
    This section also provides that a non-U.S. person that 
registers as a security-based swap dealer is subject to Title 
VII's requirements only for security-based swaps that the non-
U.S. person enters into with a U.S. person
    This section also clarifies that Title VII's capital 
requirements do not apply to non-U.S. persons registered as 
security-based swap dealers as long as the non-U.S. person's 
home country is a signatory to the Basel Capital Accord.
    This section also defines ``U.S. Person'' and ``non-U.S. 
person'' by adopting the definitions set forth in SEC 
Regulation S and adding ``a central bank or its functional 
equivalent which is located in a non-U.S. jurisdiction and that 
is a signatory to the Basel Accords'' to the definition of a 
``non-U.S. person.''

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italic and existing law in which no change is 
proposed is shown in roman):

COMMODITY EXCHANGE ACT

           *       *       *       *       *       *       *



SEC. 4S. REGISTRATION AND REGULATION OF SWAP DEALERS AND MAJOR SWAP 
                    PARTICIPANTS.

  (a) Registration.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Extra-territorial swap transaction application of 
        title vii.--
                  (A) In general.--A swap entered into 
                between--
                          (i) a swap dealer that is registered 
                        with the Commission who is either--
                                  (I) a U.S. person, or
                                  (II) a person that has a 
                                parent company that is a U.S. 
                                person, and
                          (ii) a person who is--
                                  (I) a U.S. or non-U.S. 
                                subsidiary, branch, or 
                                affiliate of such swap dealer, 
                                or
                                  (II) any other non-U.S. 
                                person that is not registered 
                                as a swap dealer with the 
                                Commission,
                shall not be subject to the provisions of title 
                VII of the Dodd-Frank Wall Street Reform and 
                Consumer Protection Act, and of amendments 
                added by such title, so long as each swap 
                dealer described under clause (i) reports such 
                swap to a swap data repository registered with 
                the Commission.
                  (B) Swaps entered into by registered non-u.s. 
                persons.--
                          (i) In general.--A non-U.S. person 
                        that registers as a swap dealer with 
                        the Commission shall only be subject to 
                        the requirements of title VII of the 
                        Dodd-Frank Wall Street Reform and 
                        Consumer Protection Act, and of 
                        amendments added by such title, with 
                        respect to swaps that such person 
                        enters into with a U.S. person who is 
                        not a U.S. subsidiary, branch, or 
                        affiliate of such non-U.S. person.
                          (ii) Capital requirements.--A non-
                        U.S. person that registers as a swap 
                        dealer with the Commission shall be 
                        permitted by the Commission to comply 
                        with the capital requirements under 
                        subsection (e) by complying with 
                        comparable requirements established by 
                        the appropriate governmental 
                        authorities in the home country of the 
                        non-U.S. person, so long as such home 
                        country is a signatory to the Basel 
                        Accords.
                  (C) Non-u.s. person.--For purposes of this 
                paragraph, the term ``non-U.S. person'' 
                includes--
                          (i) any person that is not a U.S. 
                        person;
                          (ii) any discretionary account or 
                        similar account (other than an estate 
                        or trust) held for the benefit or 
                        account of a non-U.S. person by a 
                        dealer or other professional fiduciary 
                        organized, incorporated, or (if an 
                        individual) resident in the United 
                        States;
                          (iii) any agency or branch of a U.S. 
                        person located outside the United 
                        States if--
                                  (I) the agency or branch 
                                operates for valid business 
                                reasons; and
                                  (II) the agency or branch is 
                                engaged in the business of 
                                insurance or banking and is 
                                subject to substantive 
                                insurance or banking 
                                regulation, respectively, in 
                                the jurisdiction where it is 
                                located;
                          (iv) any trust of which any 
                        professional fiduciary acting as 
                        trustee is a U.S. person, if--
                                  (I) a trustee who is a non-
                                U.S. person has sole or shared 
                                investment discretion with 
                                respect to the trust assets; 
                                and
                                  (II) no beneficiary of the 
                                trust (and no settlor if the 
                                trust is revocable) is a U.S. 
                                person;
                          (v) an employee benefit plan 
                        established and administered in 
                        accordance with the law, customary 
                        practices, and documentation of a 
                        country other than the United States; 
                        and
                          (vi) the International Monetary Fund, 
                        the International Bank for 
                        Reconstruction and Development, the 
                        Inter-American Development Bank, the 
                        Asian Development Bank, the African 
                        Development Bank, the United Nations, a 
                        central bank or its functional 
                        equivalent which is located in a non-
                        U.S. jurisdiction and that is a 
                        signatory to the Basel Accords, and 
                        their agencies, affiliates and pension 
                        plans, and any other similar 
                        international organizations, their 
                        agencies, affiliates and pension plans.
                  (D) U.S. person.--For purposes of this 
                paragraph, the term ``U.S. person'' includes--
                          (i) any natural person resident in 
                        the United States;
                          (ii) any partnership or corporation 
                        organized or incorporated under the 
                        laws of the United States;
                          (iii) any estate of which any 
                        executor or administrator is a U.S. 
                        person;
                          (iv) any trust of which any trustee 
                        is a U.S. person;
                          (v) any agency or branch of a foreign 
                        entity located in the United States;
                          (vi) any non-discretionary account or 
                        similar account (other than an estate 
                        or trust) held by a dealer or other 
                        fiduciary for the benefit or account of 
                        a United States person;
                          (vii) any discretionary account or 
                        similar account (other than an estate 
                        or trust) held by a dealer or other 
                        fiduciary organized, incorporated, or 
                        (if an individual) resident in the 
                        United States; and
                          (viii) any partnership or 
                        corporation--
                                  (I) organized or incorporated 
                                under the laws of any foreign 
                                jurisdiction; and
                                  (II) formed by a U.S. person 
                                principally for the purpose of 
                                investing in securities not 
                                registered under the Securities 
                                Act of 1933, unless it is 
                                organized or incorporated, and 
                                owned, by accredited investors 
                                (as such term is defined under 
                                section 230.501 of title 17, 
                                Code of Federal Regulations) 
                                that are not natural persons, 
                                estates, or trusts.
                  (E) Anti-evasion.--Notwithstanding any other 
                provision of this paragraph, each registered 
                swap dealer shall be subject to the provision 
                under section 2(i)(2).

           *       *       *       *       *       *       *

                              ----------                              


                    SECURITIES EXCHANGE ACT OF 1934

TITLE I--REGULATION OF SECURITIES EXCHANGES

           *       *       *       *       *       *       *


SEC. 15F. REGISTRATION AND REGULATION OF SECURITY-BASED SWAP DEALERS 
                    AND MAJOR SECURITY-BASED SWAP PARTICIPANTS.

  (a) Registration.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Extra-territorial swap transaction application of 
        title vii.--
                  (A) In general.--A security-based swap 
                entered into between--
                          (i) a security-based swap dealer that 
                        is registered with the Commission who 
                        is either--
                                  (I) a U.S. person, or
                                  (II) a person that has a 
                                parent company that is a U.S. 
                                person, and
                          (ii) a person who is a U.S. or non-
                        U.S. subsidiary, branch, affiliate, or 
                        parent company of such security-based 
                        swap dealer,
                shall not be subject to the provisions of title 
                VII of the Dodd-Frank Wall Street Reform and 
                Consumer Protection Act, and of amendments 
                added by such title, so long as each security-
                based swap dealer described under clause (i) 
                reports such security-based swap to a security-
                based swap data repository registered with the 
                Commission.
                  (B) Security-based swaps entered into by 
                registered non-u.s. persons.--
                          (i) In general.--A non-U.S. person 
                        that registers as a security-based swap 
                        dealer with the Commission shall only 
                        be subject to the requirements of title 
                        VII of the Dodd-Frank Wall Street 
                        Reform and Consumer Protection Act, and 
                        of amendments added by such title, with 
                        respect to security-based swaps that 
                        such person enters into with a U.S. 
                        person who is not a U.S. subsidiary, 
                        branch, or affiliate of such non-U.S. 
                        person.
                          (ii) Capital requirements.--A non-
                        U.S. person that registers as a 
                        security-based swap dealer with the 
                        Commission shall be permitted by the 
                        Commission to comply with the capital 
                        requirements under subsection (e) by 
                        complying with comparable requirements 
                        established by the appropriate 
                        governmental authorities in the home 
                        country of the non-U.S. person, so long 
                        as such home country is a signatory to 
                        the Basel Accords.
                  (C) Non-u.s. person.--For purposes of this 
                paragraph, the term ``non-U.S. person'' 
                includes--
                          (i) any person that is not a U.S. 
                        person;
                          (ii) any discretionary account or 
                        similar account (other than an estate 
                        or trust) held for the benefit or 
                        account of a non-U.S. person by a 
                        dealer or other professional fiduciary 
                        organized, incorporated, or (if an 
                        individual) resident in the United 
                        States;
                          (iii) any agency or branch of a U.S. 
                        person located outside the United 
                        States if--
                                  (I) the agency or branch 
                                operates for valid business 
                                reasons; and
                                  (II) the agency or branch is 
                                engaged in the business of 
                                insurance or banking and is 
                                subject to substantive 
                                insurance or banking 
                                regulation, respectively, in 
                                the jurisdiction where it is 
                                located;
                          (iv) any trust of which any 
                        professional fiduciary acting as 
                        trustee is a U.S. person, if--
                                  (I) a trustee who is a non-
                                U.S. person has sole or shared 
                                investment discretion with 
                                respect to the trust assets; 
                                and
                                  (II) no beneficiary of the 
                                trust (and no settlor if the 
                                trust is revocable) is a U.S. 
                                person;
                          (v) an employee benefit plan 
                        established and administered in 
                        accordance with the law, customary 
                        practices, and documentation of a 
                        country other than the United States; 
                        and
                          (vi) the International Monetary Fund, 
                        the International Bank for 
                        Reconstruction and Development, the 
                        Inter-American Development Bank, the 
                        Asian Development Bank, the African 
                        Development Bank, the United Nations, a 
                        central bank or its functional 
                        equivalent which is located in a non-
                        U.S. jurisdiction and that is a 
                        signatory to the Basel Accords, and 
                        their agencies, affiliates and pension 
                        plans, and any other similar 
                        international organizations, their 
                        agencies, affiliates and pension plans.
                  (D) U.S. person.--For purposes of this 
                paragraph, the term ``U.S. person'' includes--
                          (i) any natural person resident in 
                        the United States;
                          (ii) any partnership or corporation 
                        organized or incorporated under the 
                        laws of the United States;
                          (iii) any estate of which any 
                        executor or administrator is a U.S. 
                        person;
                          (iv) any trust of which any trustee 
                        is a U.S. person;
                          (v) any agency or branch of a foreign 
                        entity located in the United States;
                          (vi) any non-discretionary account or 
                        similar account (other than an estate 
                        or trust) held by a dealer or other 
                        fiduciary for the benefit or account of 
                        a United States person;
                          (vii) any discretionary account or 
                        similar account (other than an estate 
                        or trust) held by a dealer or other 
                        fiduciary organized, incorporated, or 
                        (if an individual) resident in the 
                        United States; and
                          (viii) any partnership or 
                        corporation--
                                  (I) organized or incorporated 
                                under the laws of any foreign 
                                jurisdiction; and
                                  (II) formed by a U.S. person 
                                principally for the purpose of 
                                investing in securities not 
                                registered under the Securities 
                                Act of 1933, unless it is 
                                organized or incorporated, and 
                                owned, by accredited investors 
                                (as such term is defined under 
                                section 230.501 of title 17, 
                                Code of Federal Regulations) 
                                that are not natural persons, 
                                estates, or trusts.
                  (E) Anti-evasion.--Notwithstanding any other 
                provision of this paragraph, a registered 
                security-based swap dealer shall not conduct 
                any activities that are designed to evade any 
                provision of this Act that was enacted by the 
                Wall Street Transparency and Accountability Act 
                of 2010.
                  (F) Preservation of authority.--Nothing in 
                this paragraph shall--
                          (i) exempt a transaction described in 
                        this paragraph from section 23A or 23B 
                        of the Federal Reserve Act, or 
                        implementing regulations thereunder; or
                          (ii) affect the authorities of the 
                        prudential regulators over the 
                        institutions described under 
                        subparagraphs (A) through (E) of 
                        section 1a(39) of the Commodity 
                        Exchange Act (7 U.S.C. 1a(39)) as those 
                        authorities are established in law, 
                        other than under title VII of the Dodd-
                        Frank Wall Street Reform and Consumer 
                        Protection Act and amendments made by 
                        such title.

           *       *       *       *       *       *       *


                            DISSENTING VIEWS

    Democratic Members of the Financial Services Committee 
agreed that we should not be subjecting the foreign branches 
and subsidiaries of American financial institutions to 
derivative regulation that is duplicative, or that would put 
our institutions at a significant disadvantage in seeking 
business--as a general rule. That is, we believe that that 
should be the normal way in which the branches and subsidiaries 
operate. But we unanimously supported an amendment to the 
legislation, and most of us opposed the bill's adoption when 
the amendment was defeated, because we think it is a great 
mistake to take what should be a general operating principle 
and make it an unchallengeable, invariant rule, no matter what 
the circumstances and no matter what experience shows about 
dangers that might result from abuses here.
    Our amendment would provide that the SEC and CFTC acting 
jointly could exercise their regulatory authority over the 
foreign branches and subsidiaries of American firms in case of 
any of the following conditions:
          1. Prevent the importation of systemic risk to the US 
        economy;
          2. Avoid threats to US financial stability; and,
          3. Avoid evasion of US rules.
    We note that our Republican colleagues assert that they 
have dealt with the evasion issue, but they have done so in a 
wholly inadequate way, simply by the declarative statement that 
there should be no evasion. Absent enforcement powers in the 
SEC and CFTC, this would mean very little.
    We are surprised that our colleagues believe, after all 
that happened with derivatives in the past, that it would be 
prudent to establish a regime in which the SEC and the CFTC 
could under no circumstances engage in imposing margin 
requirements or other regulatory safeguards should a pattern 
develop in which abusive practices threatened our stability. 
And while it is true that we are talking about things that 
happened outside of the U.S., it is also the case that none of 
this would have any application to financial institutions that 
have no American affiliation. That is, we are talking here 
about the foreign-based branches and subsidiaries of American 
institutions.
    We will be offering this amendment again on the floor, and 
we hope that our Republican colleagues will agree to it so that 
we can go forward with a situation in which American companies' 
foreign branches and subsidiaries can operate in general in the 
appropriate way, but with our regulatory agencies equipped to 
step in if problems arise. We do not understand how any of our 
colleagues could believe that no such safety net provision is 
required, given the experience we have had with underregulated 
derivatives.
    Finally, we note that if we do not effectively block 
transactions that are put in a place under the Republican 
version of this bill, for the purpose of evading regulation of 
derivatives, American economic interests will be harmed 
directly. That is, absent strong enforcement powers in an anti- 
evasion section, there will be some American institutions who 
will be strongly tempted to send some of their business out of 
the U.S. to be transacted by a foreign branch or subsidiary 
precisely because it will be either unregulated or inadequately 
regulated.
                                   Barney Frank.
                                   Melvin L. Watt.
                                   Luis V. Gutierrez.
                                   Andre Carson.
                                   Gwen Moore.
                                   Maxine Waters.
                                   Michael E. Capuano.
                                   Ruben Hinojosa.
                                   Carolyn B. Maloney.
                                   Gary L. Ackerman.