Wednesday, June 13, 2012

Security-Based Swaps: What's on the SEC's Agenda?


Author: David Schwartz J.D. CPA David Schwartz J.D. CPA

The SEC has issued a policy statement laying out a roadmap for how it plans to implement new rules regulating security-based swaps and security-based swap market participants under authority granted to it by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.  The Statement presents a sequencing of the compliance dates for these final rules by grouping the rules into five categories and describes the interconnectedness of the compliance dates for these rules, both within and among the five categories.

The June 11 policy statement does not estimate when the rules would be finalized, but does describe the order in which these initiatives would take effect. According to the SEC, the phased-in approach is intended to avoid the disruption that could occur if all the new rules took effect simultaneously.

In addition to mapping out the sequence of new regulation, the policy statement describes when in the process the SEC expects to expire the temporary relief the SEC previously granted to securities-based swaps market participants. Most of the temporary relief exempts these market participants from certain provisions of the Securities Act of 1933, the Securities Exchange Act of 1934, and the Trust Indenture Act of 1939. The SEC expects that the majority of of this relief will be obviated by the final regulations, and expect the relief to expire when certain final rules become effective.

The Commission expects to address sticky cross-border issues in a single release.  In this release, the SEC plans to consider all the cross-border comments and issues raised in all of the other releases on security-based swaps and security-based swap market participants.  The SEC has announced that it will likely not require compliance by participants in the US security-based swap market with the final rules arising under the Exchange Act before addressing the cross-border aspects of the rules.
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