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 Securities Lawyer's Deskbook
                         published by The University of Cincinnati College of Law
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General Rules and Regulations
under the
Securities Exchange Act of 1934

Rule 36a1-1 -- Exemption from Section 7 for OTC Derivatives Dealers

Preliminary Note: OTC derivatives dealers are a special class of broker- dealers that are exempt from certain broker-dealer requirements, including membership in a self-regulatory organization (Rule 15b9-2), regular broker-dealer margin rules (Rule 36a1-1), and application of the Securities Investor Protection Act of 1970 (Rule 36a1-2). OTC derivative dealers are subject to special requirements, including limitations on the scope of their securities activities (Rule 15a-1), specified internal risk management control systems (Rule 15c3-4), recordkeeping obligations (Rule 17a-3(a)(10)), and reporting responsibilities (Rule 17a-12). They are also subject to alternative net capital treatment (Rule 15c3-1(a)(5)).
  1. Except as otherwise provided in paragraph (b) of this section, transactions involving the extension of credit by an OTC derivatives dealer shall be exempt from the provisions of section 7(c) of the Act, provided that the OTC derivatives dealer complies with section 7(d) of the Act.

  2. The exemption provided under paragraph (a) of this section shall not apply to extensions of credit made directly by a registered broker or dealer (other than an OTC derivatives dealer) in connection with transactions in eligible OTC derivative instruments for which an OTC derivatives dealer acts as counterparty.

Regulatory History

63 FR 59362, 59404, Nov. 3, 1998

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