Communications Regarding Swaps - Non-Special Entity Letter

The Commodity Futures Trading Commission (“CFTC”) has adopted rules governing business conduct standards for swap dealers and other parties.¹ These rules apply to communications regarding swaps,² including communications that occur prior to entering into a swap. The purpose of this letter is to inform you that Capital One, National Association (“CONA”)—as a registered swap dealer—seeks to engage in certain communications with counterparties, which are not deemed to be “special entities”³ pursuant to a “safe harbor” available under those rules.

To satisfy the conditions of the safe harbor for swap communications, CONA will be making certain disclosures and agreements to you and CONA will ask that you make certain representations and agreements by executing our documentation that is required in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Supplement”). The Dodd-Frank Supplement will be provided to you as part of your onboarding materials and will specifically include:

Disclosure by CONA that it is acting in its capacity as a counterparty and not undertaking to assess the suitability of any swap for Customer.
Representations by Customer⁴ that:
- It is not a “special entity;”
- It has complied in good faith with written policies and procedures that are reasonably designed to ensure that the persons responsible for evaluating any “recommendation” (as such term is used in CFTC regulation 23.434) with respect to a swap provided by CONA and making trading decisions on behalf of Customer are capable of doing so; and
- It is exercising independent judgment in evaluating the recommendations of CONA with regard to any swap.

Please note that CONA may need to significantly limit its communications regarding swaps if the conditions of the safe harbor, as described above and confirmed by CONA and you by executing a Dodd-Frank Supplement prior to execution of a swap, are not satisfied.

Should you have any questions regarding the “safe harbor” or the disclosures and representations described herein, please contact your CONA marketer.

Learn more about FDIC insurance coverage.

Business Conduct Standards for Swap Dealers and Major Swap Participants with Counterparties, 77 Fed. Reg. 9734 (Feb. 17, 2012).

As used in this letter, the term “swap” has the same meaning of that term as defined in the Section 1a(47) of the Commodity Exchange Act and CFTC regulation 1.3. The term also includes any “foreign exchange swaps” and “foreign exchange forwards” that may be exempted from regulation as “swaps” by the Secretary of the Treasury pursuant to authority granted to the Secretary under Section 1a(47)(E) of the Commodity Exchange Act. For these purposes, “swap” includes a new swap transaction and any material amendment, mutual unwind or novation of an existing swap. The term “swap” also includes any trading strategy involving a swap.

A “special entity” is defined in Section 4s(h)(2)(C) of the Commodity Exchange Act and CFTC regulation 23.401(c) as: ‘‘(i) a Federal agency; (ii) a State, State agency, city, county, municipality, or other political subdivision of a State; (iii) an employee benefit plan, as defined in section 3 of the Employee Retirement Income Security Act of 1974; (iv) any governmental plan, as defined in Section 3 of the Employee Retirement Income Security Act of 1974; or (v) any endowment, including an endowment that is an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986.

Note: If Customer has a Designated Evaluation Agent, then additional representations by such Designated Evaluation Agent will be required.