After Dodd-Frank Enactment, SEC Moves to Clarify Security-based Swap Requirements
The Securities and Exchange Commission has announced late last week that it is moving to address one-year effective date of Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The SEC said it will take a series of actions in the next few weeks to clarify the requirements applicable to security-based swap transactions as of July 16, the effective date of Dodd-Frank 360 days after its enactment.
The securities regulator also intends to provide appropriate temporary relief. The move came as the securities regulator proposed last week that certain clearing agencies issuing registration requirements should spare security-based swaps from registering.
Title VII of the Dodd-Frank Act authorizes the SEC to regulate “security-based swaps” while at the same time authorizing the CFTC to regulate other swaps. Referred to as Subsection B that deals with the new regulatory regime for security-based swaps, Title VII will take effect on July 16.
In particular, the SEC will “provide guidance regarding which provisions of Subtitle B of Title VII will become operable as of July 16, and provide temporary relief from several of these provisions.”
Moreover, the Commission will provide guidance regarding several pre-Dodd-Frank provisions of the Exchange Act that would otherwise apply to security-based swaps on July 16.
Security-based swaps would be included in the definition of “security” under the Exchange Act, the Dodd-Frank states.
The SEC will also provide temporary relief from certain other provisions of the Exchange Act so that the industry will have time to seek while these swaps will be subject to provisions that address fraud and manipulation.
It also intends to extend the existing temporary rules under the Securities Act, the Exchange Act, and the Trust Indenture Act, and extend existing temporary relief from exchange registration under the Exchange Act.
The SEC believes this “will help to continue facilitating the clearing of certain credit default swaps by clearing agencies functioning as central counterparties.”
The Dodd-Frank Act has more than 90 provisions requiring SEC rulemaking and dozens of additional provisions that give the SEC discretionary rulemaking authority.
Of the mandatory rulemaking provisions, the SEC already has proposed or adopted rules for about two-thirds of them.
The SEC has been focusing more generally on how Title VII and the associated rules will be implemented on top of writing individual rules.
In April, the SEC and CFTC staffs held a joint public roundtable. At the same time, commissioners and staff discussed with market participants on the appropriate sequence for implementing the security-based swap regulations.
The SEC intends to publish a detailed implementation plan in order to enable the Commission to move forward with the roll-out of the new securities-based swap requirements after proposing all of the key rules under Title VII.