CFTC Eases Swap Pay-to-Play Rules With Government Pension Plans

Wall Street banks have been freed from Dodd-Frank Act limits on political contributions intended to limit fraud in swaps with government pensions.

The Commodity Futures Trading Commission, the main U.S. derivatives regulator, said in a letter yesterday that it would not enforce so-called pay-to-play restrictions on banks selling swaps to the pensions. The restrictions apply to dealers that have made political contributions to municipal officials in the two years before a trade.

The CFTC said its decision was intended to harmonize limits on political contributions from the Securities and Exchange Commission and Municipal Securities Rulemaking Board. The CFTC said in the letter that it acted after industry participants said they would need to “expend significant resources to update their current policies and procedures to ensure compliance.”

The Dodd-Frank business conduct standards were completed in January and were intended to protect less-sophisticated customers in swap trades with banks. Lawmakers in the Dodd-Frank Act called for regulators to crack down on abuses in the sales of derivatives to states, cities and school districts after municipalities lost billions of dollars on interest-rate swaps during the 2008 credit crisis.

The CFTC also said the two-year waiting period restriction won’t apply to contributions made before the end of the year. Banks won’t need to register their swap-dealing units until Dec. 31 at the earliest.

To contact the reporter on this story: Silla Brush in Washington at

To contact the editor responsible for this story: Maura Reynolds at

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