The Commodity Futures Trading Commission (“CFTC”) recently approved a final rule broadening the scope of the CFTC’s financial privacy regulations under the Gramm-Leach-Bliley Act (“GLBA”) to include “swap dealers” and “major swap participants,” two types of entities created by and subject to regulation under Dodd-Frank.  GLBA requires financial institutions to, among other requirements, establish safeguards to ensure the security and confidentiality of consumer records and to comply with certain requirements governing the disclosure of consumers’ personal information.  Swap dealers and major swap participants are expected to collect and use nonpublic personal information in a similar manner as financial institutions currently subject to GLBA’s financial privacy requirements.  The CFTC’s rule simply extends the financial privacy requirements to swap dealers and major swap participants.

The final rule becomes effective 60 days after the CFTC finalizes its regulations further defining the terms “swap dealer” and “major swap participant.”  On December 21, 2010, the CFTC issued proposed regulations with respect to these definitions.  The proposed definitions of these terms under the Dodd-Frank statute appear after the jump.

Dodd-Frank defines “swap dealer” to include any person who holds itself out as a dealer in swaps, makes a market in swaps, “regularly enters into swaps with counterparties as an ordinary course of business for its own account”, or otherwise becomes known as a dealer or market maker in swaps.

The term “major swap participant” means any person, other than a swap dealer (a) who maintains a substantial position in swaps in any major category determined by the CFTC or Securities and Exchange Commission, excluding (i) positions held for hedging or mitigating commercial risk and (ii) positions maintained by ERISA plans for the primary purpose of hedging or mitigating risks directly associated with plan operations; (b) whose outstanding swaps create substantial counterparty exposure that could have serious adverse effects on the financial stability of the United States banking system or financial markets; or (c) that is a highly leveraged financial entity that is not subject to capital requirements established by an appropriate federal banking agency and that maintains a substantial position in swaps in any major category determined by the CFTC or SEC.