SEC Commissioner Hester M. Peirce emphasized the importance of regulatory harmonization in the agency's cross-border swap regime.
In an address at the Eurofi Financial Forum, Ms. Peirce argued that an SEC regulatory regime for security-based swaps should recognize the approach to derivatives regulation taken by foreign regulators. Ms. Peirce noted recent findings relating to market fragmentation resulting from certain CFTC regulatory requirements. She advocated an approach to substituted compliance that "respects both our different approaches and shared objectives." Further, she said that these determinations should not be "rule-by-rule assessments," rather, they should take a "broader look" at the alternative regulatory regime. Ms. Peirce also advised that comparability determinations will take time and she urged non-U.S. regulators to reach out as soon as possible to get the conversations started.
Commentary
Ms. Peirce indicated that she "expects" that the SEC will soon finalize rules on security-based swap dealer reporting and recordkeeping and is working on finalizing changes to its cross-border requirements. She noted that once the final rulemakings are complete, the time period for registration (discussed in Section X of this Cadwalader memorandum) will begin, which could result in firms being required to register "as early as the second half of 2021."
Ms. Peirce's comments highlight that market participants - and their regulators - should already be thinking about how to handle the SEC regime for regulation of security-based swaps. It is true that a number of significant details, including, as Ms. Peirce notes, cross-border matters, remain to be determined. But this speech and other recent speeches by Ms. Peirce continue to drive home the point that the SEC is, finally, serious about completing this regulatory regime.
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