Securities and Exchange Commission Seeks Comments Regarding Its ‘Security-Based Swap Rules’ Implementation Plan

Now that the SEC has unveiled its plan via a “statement of general policy ” that lays out how it intends to phase in its new rules that govern security-based swap markets, it is seeking comments. Commenters have 60 days within when the statement is published in the Federal Register to make their thoughts known. While the statement gives the order in which market participants will have to comply with the new requirements, it doesn’t provide an estimate for when the rules would actually be implemented.

The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act’s Title VII mandates that SEC set up a security-based swaps regulatory framework. In its policy statement, the Commission grouped its rules for security-based swaps into five categories:

• Definitional rules (for regulating and registering swap data repositories) and cross-border rules (that regulate non-U.S. market participants and cross-border swap transactions)
• Rules that define products and participants and rules for regulating swap data repositories
• Rules that mandate the swap transaction clearing process
• Rules dealing with the regulation and registering of swap dealers and key swap participants
• Rules dealing with swap transactions and their mandatory trading

Per the SEC, the definitional rules impact compliance with the rules in the other four categories, which means this first category need to be adopted and implemented before the Commission makes compliance with the other rules mandatory. Also, the SEC noted that cross-border rules must be proposed prior to the finalization of the other rules dealing with cross-border implications.

Specific principals will guide how the compliance dates for the rules will be sequenced. For example, after the definitional and cross-border rules are adopted, then the SEC will deal with the rules related to the duties and registration of swap data repositories so that it can use transaction data that was given to the repositories to make certain determinations mandated under Dodd-Frank’s Title VII.

The SEC’s statement of principle also includes a discussion of the timing of temporary relief that has been implemented to exempt swap market participants from federal securities laws requirements. The majority of exemptions will expire when specific final rules under Title VII go into effect. SEC officials have said that among the next steps for swaps are the proposal of rules for margin, segregation, margin, reporting, recordkeeping, and capital.

Meantime, the CFTC has been tasked with developing a regulatory framework for other types of swaps.

Our institutional securities lawyers represents investor throughout the US, as well as clients abroad with financial fraud claims and lawsuits against US-based financial firms, brokers, and investment advisers. Contact Shepherd Smith Edwards and Kantas, LTD, LLP today.

Read the SEC’s Statement of General Policy (PDF)

SEC Issues “Roadmap” on Phase in of Derivatives Regulation, SEC, June 11, 2012

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Ex-Morgan Stanley Trader to Settle SEC Unauthorized Swaps Trading Claims for $150,000, Stockbroker Fraud Blog, June 13, 2011