1 USE OF SWAPS TO DEFRAUD

2
3 [EXPLANATION: Thefollowing provision would impose an additional business conduct

4 requirement on swap dealers and major swap participants, affirmatively prohibiting themfrom

5 entering into a swap if they knew, or should have known, that the swap is part ofa device,

6 scheme, or artifice to defraud, or otherwise to violate the law. A parallel provision is included

7 with respect to security-based swap dealers and major security-based swap participants as well.

8 Page and line references are to the House Bill, H.R. 4173.]

9 For Swaps:

10 (a) On page 641 ofH.R. 4173, on line 2, strike "and";

11 (b) On page 641 of H.R. 4173, on line 3, strike "(C)" and insert "(D)"; and

12 (c) On page 641 ofH.R. 4173, after line 2, insert the following:

13 "(C) prohibit a swap dealer or major swap participant from entering into a

14 swap that the swap dealer or major swap participant knew, or should have known,

15 is part of a device, scheme, or artifice to defraud or to violate any provision of

16 law; and".

17 For Security-Based Swaps:

18 (a) On page 758 ofH.R. 4173, on line 16, strike "and";

19 (b) On page 758 ofH.R. 4173, on line 17, strike "(C)" and insert "(D)"; and

20 (c) On page 758 ofH.R. 4173, after line 16, insert the following:

21 "(C) prohibit a security-based swap dealer or major security-based swap

22 participant from entering into a security-based swap that the security-based swap

23 dealer or major security-based swap participant knew, or should have known, is

24 part of a device, scheme, or artifice to defraud or to violate any provision of law;

25 and".

CFTC-CREW-0165