Laurie Green is a Partner in our Ft Lauderdale office, Michael Taylor a Partner in our Portland office and Danielle Price a Partner in our Miami office.
On June 11, 2012, the SEC issued a policy statement regarding over-the-counter derivatives rules to be adopted under Title VII of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank"). Under Dodd-Frank, the Commodity Futures Trading Commission (CFTC) is authorized to regulate "swaps," while the SEC is authorized to regulate "security-based swaps" ("SB swaps").
The SEC's June 11 statement describes the order in which the SEC expects new derivatives market rules to take effect and is open for public comment for 60 days. The statement incorporates comments received during a two-day joint public roundtable held by the staffs of the SEC and the CFTC on May 2-3, 2011, and comment letters received by the SEC and CFTC regarding specific rules proposed under and orders issued in connection with Title VII.
The policy statement describes a plan to sequentially phase-in the comprehensive and interrelated final rules governing SB swaps using certain guiding principles, including the following:
- Definitional rules will be implemented prior to all other rules.
- Rules concerning the treatment of cross-border SB swap transactions and non-U.S. persons acting in capacities regulated under Subtitle B of Title VII (the "Cross-Border Rules") will be implemented prior to rules with cross-border implications.
- Final rules establishing the registration process and duties of registered security-based swap data repositories (SDRs) will be implemented after 1 and 2 above.
- Prior to requiring SB swaps to be cleared, the SEC will reconsider amendments to net capital and customer protection with regard to SB swap-clearing activities in broker-dealers, including whether to calculate margins for SB swaps on a portfolio margin basis.
- Implementation must take into account sequencing requirements under Dodd-Frank regarding mandatory trade execution requirements.
- Persons regulated pursuant to Subtitle B of Title VII "should be given adequate, but not excessive, time to comply with the final rules applicable to them."
The SEC commented in the release that "[t]he phased-in approach is intended to avoid the disruption that could occur if all the new rules took effect simultaneously. To date, the Commission has proposed nearly all the rules required under the Act and already has begun to adopt those rules."
SEC Chairman Mary L. Schapiro commented that "[t]he policy statement seeks to provide a roadmap to market participants and the public on how we expect to implement the various regulatory requirements for this market."
The statement also discusses the expected expiration of the temporary relief granted to securities-based swaps market participants under SEC Release No. 34-64678 (June 15, 2011), SEC Release No. 34-64795 (July 1, 2011) and SEC Release No. 33-9231 (July 1, 2011). The SEC will seek public comments for 60 days after the publication of the policy statement in the Federal Register.
http://www.sec.gov/news/press/2012/2012-111.htm
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