§ 23.430 Verification of counterparty eligibility.

(a) Eligibility. A swap entity shall verify that a counterparty meets the eligibility standards for an eligible contract participant, as defined in section 1a(18) of the Act and § 1.3 of this chapter, before offering to enter into or entering into a swap with that counterparty. (b) Special Entity. In verifying the eligibility of a counterparty pursuant to paragraph (a) of this section, a swap entity shall also verify whether the counterparty is a Special Entity. (c) Special Entity election. In verifying the eligibility of a counterparty pursuant to paragraph (a) of this section, a swap entity shall verify whether a counterparty is eligible to elect to be a Special Entity under § 23.401(h)(6) and, if so, notify such counterparty of its right to make such an election. (d) Safe harbor. A swap entity may rely on written representations of a counterparty to satisfy the requirements of this section as provided in § 23.402(d). A swap entity will have a reasonable basis to rely on such written representations for purposes of the requirements in paragraphs (a) and (b) of this section if the counterparty specifies in such representations the provision(s) of section 1a(18) of the Act or paragraph(s) of § 1.3 of this chapter that describe its status as an eligible contract participant and, in the case of a Special Entity, the paragraph(s) of the Special Entity definition in § 23.401(h) that define its status as a Special Entity. (e) Exceptions. This section shall not apply with respect to a transaction that is: (1) Initiated on a designated contract market; (2) Initiated with a counterparty whose identity is not known to the swap entity prior to execution on a swap execution facility, or a trading facility currently exempted from registration as a swap execution facility by the Commission pursuant to section 5h(g) of the Act; (3) An A-ITBC Swap; or (4) An ITBC Swap initiated on a swap execution facility, or a trading facility currently exempted from registration as a swap execution facility by the Commission pursuant to section 5h(g) of the Act.