[Code of Federal Regulations]
[Title 17, Volume 1]
[Revised as of April 1, 2006]
From the U.S. Government Printing Office via GPO Access
[CITE: 17CFR34.3]

[Page 405-406]
 
              TITLE 17--COMMODITY AND SECURITIES EXCHANGES
 
             CHAPTER I--COMMODITY FUTURES TRADING COMMISSION
 
PART 34_REGULATION OF HYBRID INSTRUMENTS--Table of Contents
 
Sec.  34.3  Hybrid instrument exemption.

    (a) A hybrid instrument is exempt from all provisions of the Act and 
any person or class of persons offering, entering into, rendering advice 
or rendering other services with respect to such exempt hybrid 
instrument is exempt for such activity from all provisions of the Act 
(except in each case section 2(a)(1)(B)), provided the following terms 
and conditions are met:
    (1) The instrument is:
    (i) An equity or debt security within the meaning of section 2(1) of 
the Securities Act of 1933; or
    (ii) A demand deposit, time deposit or transaction account within 
the meaning of 12 CFR 204.2 (b)(1), (c)(1) and (e),

[[Page 406]]

respectively, offered by an insured depository institution as defined in 
section 3 of the Federal Deposit Insurance Act; an insured credit union 
as defined in section 101 of the Federal Credit Union Act; or a Federal 
or State branch or agency of a foreign bank as defined in section 1 of 
the International Banking Act;
    (2) The sum of the commodity-dependent values of the commodity-
dependent components is less than the commodity-independent value of the 
commodity-independent component;
    (3) Provided that:
    (i) An issuer must receive full payment of the hybrid instrument's 
purchase price, and a purchaser or holder of a hybrid instrument may not 
be required to make additional out-of-pocket payments to the issuer 
during the life of the instrument or at maturity; and
    (ii) The instrument is not marketed as a futures contract or a 
commodity option, or, except to the extent necessary to describe the 
functioning of the instrument or to comply with applicable disclosure 
requirements, as having the characteristics of a futures contract or a 
commodity option; and
    (iii) The instrument does not provide for settlement in the form of 
a delivery instrument that is specified as such in the rules of a 
designed contract market;
    (4) The instrument is initially issued or sold subject to applicable 
federal or state securities or banking laws to persons permitted 
thereunder to purchase or enter into the hybrid instrument.