SEC Chair Jay Clayton and Commissioner Hester M. Peirce expressed support for two SEC rulemakings applicable to security-based swap dealers ("SBSDs"). The rulemakings were previously covered here (regarding statutory disqualifications) and here (regarding risk mitigation requirements).
Mr. Clayton expressed broad support for the SEC effort to harmonize its rules with CFTC requirements "where possible" in order to minimize market disruptions and create efficiencies. He commended Commissioner Peirce for her active involvement in moving the SBSD rules forward.
Ms. Peirce commended the staff for "careful balancing" in adopting Rule 194 (relating to statutory disqualification) in addressing the SEC interest in keeping bad actors out of markets and avoiding market disruptions. She emphasized that the new rule does not provide relief where the SEC previously has barred an individual under its own rules, and said that the rule's deference to waivers granted by certain other regulators reflects a "narrowly tailored approach" that advances "regulatory comity" and avoids unnecessary duplication of efforts.
On the risk mitigation proposal, Ms. Peirce urged commenters to address two particular aspects of the proposal: (1) the distinction from the CFTC rules with respect to which terms must be reconciled under required portfolio reconciliations, and whether the benefits of the approach with respect to SDR verification were sufficient to overcome potential complexity caused by the departure from CFTC requirements; and (2) the burdens associated with compliance - in particular, which documentation and other burdens may result, and how the SEC could implement compliance in a way that appropriately addresses various demands on firm resources.
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