'U.S. Person' Definitions Under The Final Exemptive Order And The Final Guidance, Application To Certain Foreign Branches, And Determination For Collective Investment Vehicles

The cross-border application of Title VII of the Dodd-Frank Act has been a vexing question for regulators. A major factor determining the ultimate reach of such swap regulation is the definition of "U.S. person" for purposes of the regulators' guidance and other pronouncements regarding cross-border regulation.

On January 7, 2013, the CFTC published in the Federal Register a final order 1 (the "January Order"), which set forth a temporary "U.S. person" definition and provided temporary relief from certain provisions of the Dodd-Frank Act relating to swaps. The January Order expired on July 12, 2013, but on that same day the CFTC approved a new exemptive order 2 (the "July Order") providing "temporary conditional relief effective upon the expiration of the January Order in order to facilitate transition to the Dodd-Frank Swaps regime." 3 Although the July Order states that, "the Commission does not believe that an extension of the January Order is necessary or appropriate," 4 the July Order in effect simply extends many provisions of the January Order until 75 days after the publication in the Federal Register of the related final guidance 5 (the "Final Guidance"), which the CFTC also approved on July 12, 2013. The Final Guidance was published in the Federal Register on July 26, 2013, making the extension date October 9, 2013.

Significantly, the July Order extends until October 9, 2013 the "U.S. person" definition exactly as it was set forth in the January Order. 6 Upon the expiration of this definition on October 9, 2013, the "U.S. person" definition set forth in the Final Guidance will apply. The Final Guidance provides that the CFTC will interpret the term "U.S. person" generally to include, but not be limited to:

any natural person who is a resident of the United States; any estate of a decedent who was a resident of the United States at the time of death; any corporation, partnership, limited liability company, business or other trust, association, joint-stock company, fund or any form of enterprise similar to any of the foregoing (other than an entity described in prongs (iv) or (v), below) (a "legal entity"), in each case that is organized or incorporated under the laws of a state or other jurisdiction in the United States or having its principal place of business in the United States; any pension plan for the employees, officers or principals of a legal entity described in prong (iii), unless the pension plan is primarily for foreign...