SEC Commissioners Allison Herren Lee and Caroline A. Crenshaw urged continued careful monitoring of the security-based swap regulatory regime.
In a public statement, the Commissioners warned of the importance of ensuring the data collected by the SEC allows the agency to "detect the buildup and concentration of risk" and that the SBS framework "guards the financial integrity of security-based swap dealers and major security-based swap participants, thereby reducing risks to investors and the financial system."
The Commissioners acknowledged the November 1, 2021, deadline for security-based swap dealers to register with the SEC. Ms. Lee and Ms. Crenshaw expressed concerns that certain regulatory actions in 2019 "weakened or eliminated" "key safeguards" in SEC Title VII rules. In particular, they cited (1) amendments to the "bad actor" requirements in SEC Rule 194; (2) application of SEC rules to activity where the SBS is arranged, negotiated or executed in the United States; and (3) various changes to capital and margin requirements.
Commentary
The Commissioners' statement is based on sound policy: the SEC should monitor the application of its rules and consider whether modifications are necessary. However, the suggestion that existing rules are insufficient seems unnecessary at this stage. For example, on "bad actor" protections and the application of SEC rules to arranged, negotiated or executed ("ANE") transactions, the SEC's adopted approach is, in meaningful ways, more restrictive than the regime under parallel CFTC requirements for swaps (which were originally adopted under then-CFTC Chair, now-SEC Chair Gary Gensler).
Primary Sources
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