Federal Register: Ownership Limitations and Governance Requirements for Security-Based Swap Clearing Agencies, Security-Based Swap Execution Facilities, and National Securities Exchanges With Respect to Security-Based Swaps Under Regulation MC

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Dodd-Frank Timeline, Ownership Limitations and Governance Requirements for SBS Entities, SEC
Proposal Date Comment Deadline Reopened Comment Period Deadline
October 26, 2010 April 29, 2011 July 22, 2013

On October 13, 2010, the SEC held an open meeting concerning Regulation MC to mitigate conflicts of interest at security-based swap clearing agencies, security-based swap execution facilities, and national security exchanges that post or make available for trading security-based swaps under the Dodd-Frank Act. The proposed rule would provide guidelines for ownership and voting limitation for security-based swaps, as well as guidelines for independent directors sitting on SBS boards.[1] Proposed rules were added to the Federal Register on October 26, 2010.

On March 2, 2011, the SEC held an open meeting proposing the extension of the comment period for rules regarding Regulation MC. The proposal was approved and comments were accepted until April 29, 2011. This proposal was added to the Federal Register on March 8, 2011.

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 is July 22, 2013. To submit a comment, click HERE.

Proposed Rules
The proposed rules would set one of the following alternatives for SBS clearing agencies:

  • "Restrict an individual clearing agency participant from beneficially owning or voting more than 20 percent of any voting interest in the security-based swap clearing agency;
  • Restrict clearing agency participants from beneficially owning or voting more than 40 percent of any voting interest in the security-based swap clearing agency in the aggregate with any other clearing agency participants;
  • The board of directors and any committee that has authority to act on behalf of the board be composed of 35 percent of independent directors;
  • The nominating committee be composed of a majority of independent directors;"

or

  • "Restrict an individual clearing agency participant from beneficially owning or voting more than 5 percent of any voting interest in the security-based swap clearing agency;
  • The board of directors and any committee that has authority to act on behalf of the board be composed of a majority of independent directors;
  • The nominating committee be composed solely of independent directors.

Other proposed rules, concerning a board of directors and the independent director component of that board, include:

  • "Security-based SEFs and security-based swap exchanges restrict participants or members, as applicable, from owning or holding more than 20 percent of any voting interest of such entity.
  • The board of directors of a security-based SEF or security-based swap exchange, any executive committee of the board of a security-based SEF or security-based swap exchange, and any board committee exercising powers of the board of a security-based SEF or security-based swap exchange be composed of a majority of independent directors.
  • The nominating committee of a security-based SEF or security-based swap exchange consists solely of independent directors.
  • The board of directors of a security-based SEF or security-based swap exchange establish a regulatory oversight committee consisting solely of independent directors to oversee the security-based SEF's or security-based swap exchange's regulatory program, and any recommendation of a regulatory oversight committee that is not adopted by the board of a security-based SEF or security-based swaps exchange be reported promptly to the Commission.
  • The disciplinary panels of a security-based swap clearing agency, security-based SEF or security-based swap exchange be compositionally balanced and include one person who would qualify as an independent director."

References

  1. Press Release - SEC Proposes Rules to Mitigate Conflicts of Interest Involving Security-Based Swaps. SEC. Retrieved on October 13, 2010.

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