On November 1, 2012, SVIA filed written comments with the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC). The Commissions reopened their original August 25, 2011, request for information that covered 29 questions on October 2, 2012. The Commissions reopened the request for information since the earlier comments did not have the benefit of the final swap definition rules and the insurance product test exemption, which is included in these rules. The comment period, which was scheduled to close on November 2, now closes on December 31, 2012, according to the CFTC’s website. To date, 18 entities including the SVIA have filed comments, which is a little more than half of the number of comments received during the first request.
In SVIA’s November 1st comments, the Association made two additional points. SVIA focused on the logic that the Commission used to define a swap and exempt certain insurance products and commercial agreements from the swap definition to further explain why stable value contracts do not fall within the swap definition. The SVIA also explained in the seven page supplemental letter why stable value contracts do not fit into the regulatory framework that the Dodd-Frank Act and the Commissions have structured for over-the-counter swaps.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) requires the Commissions jointly to conduct a study to determine if stable value contracts used exclusively in defined contribution plans fall within the definition of a swap. Further, the Dodd-Frank Act requires that the Commissions not only determine if stable value contracts are swaps but also requires the Commissions to determine if an exemption from regulation as a swap is in the public interest, should the Commissions determine that stable value contracts fall within the technical definition of a swap. Until the Commissions make these decisions, stable value contracts are not swaps. Additionally, the Dodd-Frank Act says that the Commissions’ decisions will apply prospectively to stable value contracts.
Although the Dodd-Frank Act required the Commissions to conduct the study within 15 months of the passage of the Act, which has long since passed, it is still hard to predict a timetable for the Commissions’ actions. The reopening of the comment period demonstrates that the CFTC and SEC are taking a very deliberative and thorough approach. The extension of the comment period (the original deadline was November 2, which was in the middle of Sandy, one of the worst tropical storms/hurricanes that traveled the length of the East Coast) through the end of this year also indicates it is unlikely that the study team’s report and/or a decision regarding stable value contracts will be made this year.