HR 3145 IHCommentsClose CommentsPermalink

To amend the securities laws to prohibit credit default swaps and to provide the Securities and Exchange Commission with the authority to regulate swap agreements.CommentsClose CommentsPermalink

July 9, 2009CommentsClose CommentsPermalink

Ms. WATERS introduced the following bill; which was referred to the Committee on Financial ServicesCommentsClose CommentsPermalink

To amend the securities laws to prohibit credit default swaps and to provide the Securities and Exchange Commission with the authority to regulate swap agreements.CommentsClose CommentsPermalink

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,CommentsClose CommentsPermalink

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘Credit Default Swap Prohibition Act of 2009’.CommentsClose CommentsPermalink

SEC. 2. FINDINGS AND PURPOSE.

(a) Findings- The Congress finds the following:CommentsClose CommentsPermalink





(1) Credit default swaps were conceived as insurance instruments, used to diffuse risk and increase liquidity throughout our lending system.CommentsClose CommentsPermalink





(2) The credit default swap market has grown over the past decade to include contracts that are entered into by persons with no economic interest in the contract’s underlying reference event, also known as naked credit default swaps.CommentsClose CommentsPermalink





(3) Certain parties wrote credit default swap contracts without posting collateral, leaving them overexposed to certain asset classes and creating a systemic risk.CommentsClose CommentsPermalink





(4) Unconnected and uncollateralized speculation creates an unnecessary risk for our financial system.CommentsClose CommentsPermalink





(5) Credit default swaps have proved to be harmful financial instruments and have caused significant wealth destruction during our economic crisis.CommentsClose CommentsPermalink





(b) Purpose- The purposes of this Act are--CommentsClose CommentsPermalink





(1) to allow the Securities and Exchange Commission to have oversight over all security-based swap agreements; andCommentsClose CommentsPermalink





(2) to prevent further damage to our economy by prohibiting credit default swaps.CommentsClose CommentsPermalink

SEC. 3. ESTABLISHING SECURITIES AND EXCHANGE COMMISSION OVERSIGHT OF CREDIT DEFAULT SWAPS.

(a) Definition of Credit Default Swap-CommentsClose CommentsPermalink





(1) Section 2(a) of the Securities Act of 1933 (15 U.S.C. 77b(a)) is amended by adding at the end the following:CommentsClose CommentsPermalink





‘(17) CREDIT DEFAULT SWAP- The term ‘credit default swap’ means--CommentsClose CommentsPermalink





‘(A) a swap agreement (as such term is defined in section 206A of the Gramm-Leach-Bliley Act) that protects a party to such agreement against the risk of a loss of value because of the occurrence or non-occurrence of an event or contingency specified in such agreement relating to a security, loan, or other reference asset; andCommentsClose CommentsPermalink





‘(B) such other forms of credit risk protection as the Commission may, by rule, prescribe as necessary or appropriate in the public interest or for the protection of investors.’.CommentsClose CommentsPermalink





(2) Section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)) is amended by adding at the end the following:CommentsClose CommentsPermalink





‘(65) CREDIT DEFAULT SWAP- The term ‘credit default swap’ means--CommentsClose CommentsPermalink





‘(A) a swap agreement (as such term is defined in section 206A of the Gramm-Leach-Bliley Act) that protects a party to such agreement against the risk of a loss of value because of the occurrence or non-occurrence of an event or contingency specified in such agreement relating to a security, loan, or other reference asset; andCommentsClose CommentsPermalink





‘(B) such other forms of credit risk protection as the Commission may, by rule, prescribe as necessary or appropriate in the public interest or for the protection of investors.’.CommentsClose CommentsPermalink





(b) Securities Act Jurisdiction Over Swaps- Section 2A(b) of the Securities Act of 1933 (15 U.S.C. 77b-1(b)) is amended--CommentsClose CommentsPermalink





(1) in paragraph (1), by striking ‘does not’ and inserting ‘shall’;CommentsClose CommentsPermalink





(2) by amending paragraph (2) to read as follows:CommentsClose CommentsPermalink





‘(2) The Commission may require the registration of any security-based swap agreement under this title.’; andCommentsClose CommentsPermalink





(3) by amending paragraph (3) to read as follows:CommentsClose CommentsPermalink





‘(3) The Commission may promulgate rules, interpret rules, enforce rules, and issue orders of general applicability under this title in a manner that imposes or specifies reporting or recordkeeping requirements, procedures, or standards as prophylactic measures against fraud, manipulation, or insider trading with respect to any security-based swap agreement.’.CommentsClose CommentsPermalink





(c) Securities Exchange Act Jurisdiction Over Swaps- Section 3A(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78c-1(b)) is amended--CommentsClose CommentsPermalink





(1) in paragraph (1), by striking ‘does not’ and inserting ‘shall’;CommentsClose CommentsPermalink





(2) by amending paragraph (2) to read as follows:CommentsClose CommentsPermalink





‘(2) The Commission may require registration of any security-based swap agreement under this title.’; andCommentsClose CommentsPermalink





(3) by amending paragraph (3) to read as follows:CommentsClose CommentsPermalink





‘(3) The Commission may promulgate rules, interpret rules, enforce rules, and issue orders of general applicability under this title in a manner that imposes or specifies reporting or recordkeeping requirements, procedures, or standards as prophylactic measures against fraud, manipulation, or insider trading with respect to any security-based swap agreement.’.CommentsClose CommentsPermalink





(d) Technical and Conforming Amendment-CommentsClose CommentsPermalink





(1) Section 17 of the Securities Act of 1933 (15 U.S.C. 77q) is amended by striking subsection (d).CommentsClose CommentsPermalink





(2) Section 9 of the Securities Exchange Act of 1934 (15 U.S.C. 78i) is amended by striking subsection (i).CommentsClose CommentsPermalink





(3) Section 15 of the Securities Exchange Act of 1934 (15 U.S.C. 78o) is amended by striking subsection (i) (as added by section 303(f) of the Commodity Futures Modernization Act of 2000).CommentsClose CommentsPermalink





(4) Section 16 of the Securities Exchange Act of 1934 (15 U.S.C. 78p) is amended by striking subsection (g).CommentsClose CommentsPermalink





(5) Section 20 of the Securities Exchange Act of 1934 (15 U.S.C. 78t) is amended by striking subsection (f).CommentsClose CommentsPermalink





(6) Section 21A of the Securities Exchange Act of 1934 (15 U.S.C. 78u-1) is amended by striking subsection (g).CommentsClose CommentsPermalink

SEC. 4. PROHIBITION ON CREDIT DEFAULT SWAPS.

The Securities Exchange Act of 1934 is amended by inserting after section 7 (15 U.S.C. 78g) the following new section:CommentsClose CommentsPermalink

‘SEC. 7A. PROHIBITION ON CREDIT DEFAULT SWAPS.

‘It shall be unlawful for any person to enter into a credit default swap agreement or contract.’.CommentsClose CommentsPermalink

SEC. 5. EFFECTIVE DATE.

This Act and the amendments made by this Act shall take effect with respect to swap agreements (as such term is defined in section 206A of the Gramm-Leach-Bliley Act) and credit default swaps (as such term is defined in section 3(a)(65) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(65))) entered into after the end of the 180-day period beginning on the date of the enactment of this Act.CommentsClose CommentsPermalink