USA Law and Practice Contributed by: Bjorn Bjerke, Corey Reis and Joshua Kopel, A&O Shearman
General Disclosure Laws or Regulations . Viola - tions of the “swaps” rules promulgated by the CFTC will be subject to enforcement and pen - alties by the CFTC. Furthermore, the CFTC’s authority to penalise manipulation and fraud is similar to the SEC’s authority under Section 10(b) of the Exchange Act. In addition, the CFTC has anti-avoidance authority to treat transactions that are wilfully structured to evade the requirements of the Dodd–Frank Act as swaps transactions, and to bring enforcement actions where such transac - tions fail to satisfy applicable criteria. Further - more, the Attorneys General of the various US states and territories also have authority to bring enforcement actions under Section 13a-2 of the CEA where their citizens are adversely affected. The penalties range from injunction or restraining orders, to writs or orders mandating compliance, to fines. The CFTC can also impose equitable remedies, including restitution and disgorge - ment of gains. Wilful violations and abuse of the end-user clearing exception are felonies punish - able by a fine of up to USD1 million or imprison - ment for up to ten years, or both, together with the cost of prosecution (see CEA Section 13). 4.8 Investor Protection The primary investor protections follow from the general and specific securities laws described in this chapter. As noted in 4.7 Use of Derivatives , transactions that violate the securities laws may be voidable and may give rise to both private and public enforcement. 4.9 Banks Securitising Financial Assets Banks are highly regulated entities and are also subject to a separate insolvency regime com - pared to other entities. They are therefore not eligible for bankruptcy protection. The compre - hensive regulation applicable to banks results in
a parallel regulatory structure in the context of banks sponsoring securitisations that will apply to certain aspects of a securitisation transaction by banks. The most relevant of the securitisa - tion-specific rules are: • the safe harbour provisions of 12 CFR 360.6 relating to transfer of assets in connection with a securitisation, which are discussed in 6.1 Insolvency Laws ; • the Basel III capital requirements and US B3E proposal discussed in 4.6 Treatment of Secu- ritisation in Financial Entities ; and • the Volcker Rule discussed in 4.11 Activities Avoided by SPEs or Other Securitisation Entities . The banks are also subject to risk retention, but the rules are the same as those applicable to non-banking entities. General banking rules may also come into play when structuring a bank- sponsored securitisation, such as restrictions on affiliate transactions set forth in Sections 23A and 23B of the Federal Reserve Act and the implementation thereof set forth in Regulation W. 4.10 SPEs or Other Entities Organisational Forms of SPEs Used in Securitisations SPEs used in securitisations can theoretically take almost any organisational form, including an LLC, a corporation, a trust or a partnership. However, as a practical matter, SPEs organised in the USA overwhelmingly tend to be organ - ised as an LLC or a statutory trust. For certain asset classes it is also typical to use securitisa - tion SPEs organised as foreign corporations in a jurisdiction that does not impose entity-level tax on such corporations. The rules governing such entities will be a combination of:
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