"Clarity for Loan Participations Under Dodd-Frank" by Jennifer Grady and John Clark

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July 19, 2012

The U.S. Securities and Exchange Commission (SEC) and U.S. Commodity Futures Trading Commission (CFTC) have released final rules and guidance clarifying that standard loan participations will not be regulated as “swaps” under the Dodd-Frank Wall Street Reform and Consumer Protection Act’s regulatory regime.  Their statements revise prior proposed guidance that relied on a “true participation” test that could have subjected LMA-style participations to swap regulation.  In response to loan industry concerns, the final regulatory guidance disposes of the “true participation” test and instead relies on a four-part test that examines whether a given agreement bears certain hallmarks of a loan participation. 

In this memorandum, Richards Kibbe & Orbe LLP attorneys Jennifer Grady and John A. Clark discuss the guidance provided by the SEC and CFTC.

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