Federal Register: Business Conduct Standards for Security-Based Swap Dealers and Major Security-Based Swap Participants

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Dodd-Frank Timeline, Business Conduct Standards for Security-Based Swap Dealers and Major Security-Based Swap Participants, SEC
Proposal Date Comment Deadline Reopened Comment Period Deadline
July 18, 2011 August 29, 2011 July 22, 2013

The U.S. Securities and Exchange Commission (SEC) held a public meeting on June 29, 2011 focused on the issuance of proposed rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act concerning business conduct standards for security-based swap dealers and major security-based swap participants.

"The proposed rules would require security-based swap dealers and major security-based swap participants to communicate in a fair and balanced manner and make certain disclosures, including conflicts of interest and material incentives to potential counterparties. Additional requirements would be imposed for dealings with special entities, which include municipalities, pension plans, endowments and similar entities."[1]

Note: On May 1, 2013, the comment periods were reopened for SEC proposed rules related to security-based swaps and security-based swap entities. The extended comment deadline was July 22, 2013. To submit a comment, click HERE.


Proposed Rules

"Among other things, the proposed rules would require security-based swap dealers and major security-based swap participants to:

  • verify whether a counterparty is an eligible contract participant and whether it is a special entity;
  • disclose to the counterparty material information about the security-based swap, including material risks, characteristics, incentives and conflicts of interest;
  • provide the counterparty with information concerning the daily mark of the security-based swap;
  • provide the counterparty with information regarding the ability to require clearing of the security-based swap;
  • communicate with counterparties in a fair and balanced manner based on principles of fair dealing and good faith;
  • establish a supervisory and compliance infrastructure; and
  • designate a chief compliance officer that is required to fulfill the described duties and provide an annual compliance report.

The proposed rules also would require security-based swap dealers to:

  • determine that any recommendations they make regarding security-based swaps are suitable for their counterparties (this proposal is similar to the FINRA rule regarding suitability, including institutional suitability);
  • establish, maintain and enforce policies and procedures reasonably designed to obtain and retain a record of the essential facts concerning each known counterparty that are necessary to conduct business with such counterparty; and
  • comply with rules designed to prevent 'pay-to-play.'"

Proposed rules were added to the Federal Register on July 18, 2011.

References

  1. SEC Proposes Business Conduct Standards for Security-Based Swap Dealers and Major Security-Based Swap Participants. SEC. Retrieved on June 29, 2011.

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