Elon Law Professor Thomas Molony published an article titled, “Still Floating: Security-Based Swap Agreements After Dodd-Frank,” in the latest issue of the Seton Hall Law Review.
“This Article examines the historical interpretation of the term ‘security-based swap agreement,’ its application in Langford and LeCroy, and the continuing viability of applying antifraud provisions of the Securities Act and the Exchange Act to security-based swap agreements post-Dodd-Frank,” Molony writes in the article.
In the article, Molony’s asserts that the term “security-based swap agreement” has been poorly interpreted in numerous cases, is overly broad and creates confusion.
“Although it certainly is not the most important reason to eliminate the ‘security-based swap agreement’ concept from the Securities Act and the Exchange Act, having both ‘security-based swaps’ and ‘security-based swap agreements’ in the same regulatory regime creates the potential for confusion,” Molony writes in the article. “If Congress wanted to retain the term ‘security-based swap agreement,’ it should have been more creative in the names it gave in Dodd-Frank to the over-the-counter derivatives subject to broad SEC jurisdiction and those subject to broad CFTC jurisdiction.”
Molony’s ultimate conclusion is that Congress should use it’s authority to stop the application of antifraud provisions in the federal securities laws to security-based swap agreements.
“The ‘security-based swap agreement’ concept is fraught with problems,” Molony writes in the article. “When Congress enacted Dodd-Frank, it should have recognized these problems and erased the ‘security-based swap agreement’ concept from the federal securities laws.”