12 U.S.C. § 5462: Definitions

Summary

It gives plain meanings for key words used in this part of the law. Appropriate financial regulator means the main federal agency that oversees a firm — for example the primary regulator, the National Credit Union Administration for insured credit unions, or the Federal Reserve for certain Fed organizations. Designated activity means a payment, clearing, or settlement task that the Council has labeled as systemically important. Designated clearing entity means a designated financial market utility that clears derivatives or securities and is registered with the CFTC or the SEC. Designated financial market utility means a financial market utility the Council has marked as systemically important. Financial institution covers banks, branches of foreign banks, credit unions, Federal Reserve entities, brokers and dealers, investment companies and advisers, insurance companies, futures-related firms, and any company that does financial business. It does not include certain registered exchanges, trading systems, data repositories, swap facilities, or designated clearing entities for the activities that make those entities registered. Financial market utility means an operator of a multilateral system that moves, clears, or settles payments, securities, or other financial transactions; some exchanges and ordinary broker or investment functions are excluded when they do not perform core clearing or risk-management roles. Payment, clearing, or settlement activity means work done to finish financial transactions (like transfers, securities, futures, repos, swaps, foreign exchange, and similar deals) and can include calculating unsettled trades, netting, recordkeeping, risk management, moving funds, and final settlement. Supervisory Agency is the federal agency with primary oversight of a designated utility (SEC, CFTC, the federal banking agency, or the Board), and if more than one agency has jurisdiction they must pick one or the Council will decide. Systemically important means a failure or disruption could spread big liquidity or credit problems and threaten U.S. financial stability.

Title 12, §5462

Banks and Banking, Source: USLM XML via OLRC

In this subchapter, the following definitions shall apply:

(1)Appropriate financial regulator (2) Designated activity

The term “appropriate financial regulator” means—

(A)the primary financial regulatory agency, as defined in section 5301 of this title;

(B)the National Credit Union Administration, with respect to any insured credit union under the Federal Credit Union Act (12 U.S.C. 1751 et seq.); and

(C)the Board of Governors, with respect to organizations operating under section 25A of the Federal Reserve Act (12 U.S.C. 611), and any other financial institution engaged in a designated activity.

(3)Designated clearing entity

The term “designated clearing entity” means a designated financial market utility that is a derivatives clearing organization registered under section 5b of the Commodity Exchange Act (7 U.S.C. 7a–1) or a clearing agency registered with the Securities and Exchange Commission under section 17A of the Securities Exchange Act of 1934 (15 U.S.C. 78q–1).

(4)Designated financial market utility

The term “designated financial market utility” means a financial market utility that the Council has designated as systemically important under section 5463 of this title.

(5)Financial institution

(A)In general

The term “financial institution” means—

(i)a depository institution, as defined in section 1813 of this title;

(ii)a branch or agency of a foreign bank, as defined in section 3101 of this title;

(iii)an organization operating under section 25 or 25A of the Federal Reserve Act (12 U.S.C. 601–604a and 611 through 631);

(iv)a credit union, as defined in section 101 of the Federal Credit Union Act (12 U.S.C. 1752);

(v)a broker or dealer, as defined in section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c);

(vi)an investment company, as defined in section 80a–3 of title 15;

(vii)an insurance company, as defined in section 80a–2 of title 15;

(viii)an investment adviser, as defined in section 80b–2 of title 15;

(ix)a futures commission merchant, commodity trading advisor, or commodity pool operator, as defined in section 1a of the Commodity Exchange Act (7 U.S.C. 1a); and

(x)any company engaged in activities that are financial in nature or incidental to a financial activity, as described in section 4 of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)).

(B)Exclusions

The term “financial institution” does not include designated contract markets, registered futures associations, swap data repositories, and swap execution facilities registered under the Commodity Exchange Act (7 U.S.C. 1 et seq.), or national securities exchanges, national securities associations, alternative trading systems, securities information processors solely with respect to the activities of the entity as a securities information processor, security-based swap data repositories, and swap execution facilities registered under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), or designated clearing entities, provided that the exclusions in this subparagraph apply only with respect to the activities that require the entity to be so registered.

(6)Financial market utility

(A)Inclusion

The term “financial market utility” means any person that manages or operates a multilateral system for the purpose of transferring, clearing, or settling payments, securities, or other financial transactions among financial institutions or between financial institutions and the person.

(B)Exclusions

The term “financial market utility” does not include—

(i)designated contract markets, registered futures associations, swap data repositories, and swap execution facilities registered under the Commodity Exchange Act (7 U.S.C. 1 et seq.), or national securities exchanges, national securities associations, alternative trading systems, security-based swap data repositories, and swap execution facilities registered under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), solely by reason of their providing facilities for comparison of data respecting the terms of settlement of securities or futures transactions effected on such exchange or by means of any electronic system operated or controlled by such entities, provided that the exclusions in this clause apply only with respect to the activities that require the entity to be so registered; and

(ii)any broker, dealer, transfer agent, or investment company, or any futures commission merchant, introducing broker, commodity trading advisor, or commodity pool operator, solely by reason of functions performed by such institution as part of brokerage, dealing, transfer agency, or investment company activities, or solely by reason of acting on behalf of a financial market utility or a participant therein in connection with the furnishing by the financial market utility of services to its participants or the use of services of the financial market utility by its participants, provided that services performed by such institution do not constitute critical risk management or processing functions of the financial market utility.

(7)Payment, clearing, or settlement activity

(A)In general

The term “payment, clearing, or settlement activity” means an activity carried out by 1 or more financial institutions to facilitate the completion of financial transactions, but shall not include any offer or sale of a security under the Securities Act of 1933 (15 U.S.C. 77a et seq.), or any quotation, order entry, negotiation, or other pre-trade activity or execution activity.

(B)Financial transaction

For the purposes of subparagraph (A), the term “financial transaction” includes—

(i)funds transfers;

(ii)securities contracts;

(iii)contracts of sale of a commodity for future delivery;

(iv)forward contracts;

(v)repurchase agreements;

(vi)swaps;

(vii)security-based swaps;

(viii)swap agreements;

(ix)security-based swap agreements;

(x)foreign exchange contracts;

(xi)financial derivatives contracts; and

(xii)any similar transaction that the Council determines to be a financial transaction for purposes of this subchapter.

(C)Included activities

When conducted with respect to a financial transaction, payment, clearing, and settlement activities may include—

(i)the calculation and communication of unsettled financial transactions between counterparties;

(ii)the netting of transactions;

(iii)provision and maintenance of trade, contract, or instrument information;

(iv)the management of risks and activities associated with continuing financial transactions;

(v)transmittal and storage of payment instructions;

(vi)the movement of funds;

(vii)the final settlement of financial transactions; and

(viii)other similar functions that the Council may determine.

(D)Exclusion

Payment, clearing, and settlement activities shall not include public reporting of swap transaction data under section 727 or 763(i) of the Wall Street Transparency and Accountability Act of 2010.

(8)Supervisory Agency

(A)In general

The term “Supervisory Agency” means the Federal agency that has primary jurisdiction over a designated financial market utility under Federal banking, securities, or commodity futures laws, as follows:

(i)The Securities and Exchange Commission, with respect to a designated financial market utility that is a clearing agency registered with the Securities and Exchange Commission.

(ii)The Commodity Futures Trading Commission, with respect to a designated financial market utility that is a derivatives clearing organization registered with the Commodity Futures Trading Commission.

(iii)The appropriate Federal banking agency, with respect to a designated financial market utility that is an institution described in section 1813(q) of this title.

(iv)The Board of Governors, with respect to a designated financial market utility that is otherwise not subject to the jurisdiction of any agency listed in clauses (i), (ii), and (iii).

(B)Multiple agency jurisdiction

If a designated financial market utility is subject to the jurisdictional supervision of more than 1 agency listed in subparagraph (A), then such agencies should agree on 1 agency to act as the Supervisory Agency, and if such agencies cannot agree on which agency has primary jurisdiction, the Council shall decide which agency is the Supervisory Agency for purposes of this subchapter.

(9)Systemically important and systemic importance

The terms “systemically important” and “systemic importance” mean a situation where the failure of or a disruption to the functioning of a financial market utility or the conduct of a payment, clearing, or settlement activity could create, or increase, the risk of significant liquidity or credit problems spreading among financial institutions or markets and thereby threaten the stability of the financial system of the United States.

Notes & Related Subsidiaries

Editorial Notes

References in Text

The Federal Credit Union Act, referred to in pars. (1)(B) and (5)(A)(iv), is act

June 26, 1934, ch. 750, 48 Stat. 1216, which is classified principally to chapter 14 (§ 1751 et seq.) of this title. section 101 of the Act, classified to section 1752 of this title, does not contain a definition of “credit union”. For complete classification of this Act to the Code, see section 1751 of this title and Tables. section 25 and 25A of the Federal Reserve Act, referred to in pars. (1)(C) and (5)(A)(iii), are classified to subchapters I (§ 601 et seq.) and II (§ 611 et seq.), respectively, of chapter 6 of this title. The Commodity Exchange Act, referred to in pars. (5)(B) and (6)(B)(i), is act Sept. 21, 1922, ch. 369, 42 Stat. 998, which is classified generally to chapter 1 (§ 1 et seq.) of Title 7, Agriculture. For complete classification of this Act to the Code, see section 1 of Title 7 and Tables. The Securities Exchange Act of 1934, referred to in pars. (5)(B) and (6)(B)(i), is act

June 6, 1934, ch. 404, 48 Stat. 881, which is classified principally to chapter 2B (§ 78a et seq.) of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see section 78a of Title 15 and Tables. The Securities Act of 1933, referred to in par. (7)(A), is title I of act

May 27, 1933, ch. 38, 48 Stat. 74, which is classified generally to subchapter I (§ 77a et seq.) of chapter 2A of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see section 77a of Title 15 and Tables. section 727 and 763(i) of the Wall Street Transparency and Accountability Act of 2010, referred to in par. (7)(D), are section 727 and 763(i) of Pub. L. 111–203, which amended section 2 of Title 7, Agriculture, and section 78m of Title 15, Commerce and Trade, respectively, effective on the later of 360 days after

July 21, 2010, or, to the extent it requires a rulemaking, not less than 60 days after publication of the final rule or regulation.

§5462 Definitions

Summary

Title 12, §5462

Notes & Related Subsidiaries

Editorial Notes

References in Text

Citations & Metadata