ISDA®
INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION, INC.
NEWS RELEASE
For Immediate Release Friday, June 13, 2008
For More Information, Please Contact:
Louise Marshall, ISDA New York, +1 212-901-6014, lmarshall@isda.org

ISDA COMMENTS ON TCI RULING

NEW YORK, Friday, June 13, 2008 – On June 3, the International Swaps and Derivatives Association, Inc. (ISDA) filed jointly with the Securities Industry and Financial Markets Association (SIFMA) an amicus brief supporting The Children’s Investment Fund (TCIF) in the case of CSX Corporation v. TCI. One of the legal questions presented during the case was the standard for determining when a person is a “beneficial owner” of a security within the meaning of Section 13 of the Securities Exchange Act of 1934.

On June 11, Judge Kaplan of the U.S. District Court (SDNY) ruled that the defendants, hedge funds, by entering into cash-settled equity total return swaps referenced to CSX, are deemed beneficial owners of the referenced CSX stock held by its short counterparty. He ruled that under the specific circumstances presented, the defendants created an arrangement that, as part of a plan or scheme to avoid disclosure, prevents the vesting of beneficial ownership.

Notably, however, Judge Kaplan’s narrow, fact specific holding did not reach the broad conclusion that the holder of a swap beneficially owns the referenced stock held by its short counterparty. ISDA continues to support the position, as noted in its Amicus Brief to the Court, that a short party in a swap contract that hedges its swap exposure by acquiring the referenced shares does not confer beneficial ownership of the referenced shares to the long party.

"ISDA supports disclosure of share ownership (above relevant thresholds) and any arrangements to acquire shares or voting rights. It also supports an active approach to ensuring compliance with this. We maintain that there is a meaningful difference between cash-settled derivatives and such ownership, as noted in our Amicus Brief to the court," said Katherine Darras, General Counsel, Americas, ISDA.

About ISDA

ISDA, which represents participants in the privately negotiated derivatives industry, is the largest global financial trade association, by number of member firms. ISDA was chartered in 1985, and today has over 830 member institutions from 56 countries on six continents. These members include most of the world's major institutions that deal in privately negotiated derivatives, as well as many of the businesses, governmental entities and other end users that rely on over-the-counter derivatives to manage efficiently the financial market risks inherent in their core economic activities. Information about ISDA and its activities is available on the Association's web site: www.isda.org.

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