SEC Open Meeting, June 29, 2011
|Reopened Comment Period Deadline||Final Rule Approved||Effective Date|
|July 22, 2013||April 13, 2016||June 27, 2016|
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."
"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.'"
Business Conduct Standards for Security-Based Swap Dealers and Major Security-Based Swap Participants
Commissioner Luis A. Aguilar, whose statements include:
- Support for the proposal, as well as the following questions:
- "Which standard, if any, best implements the protections for counterparties that Congress provided in the Dodd-Frank Act?
- Would the proposed rules regarding a Special Entity’s qualified independent representative adequately ensure that the Special Entity receive advice that is in its best interests?
- Does the proposed suitability rule for SBS Dealers provide adequate protection for all counterparties and establish a level playing field?
Chairman Mary L. Schapiro, whose statements include:
- "In laying the groundwork for this new regulatory regime, Congress recognized the importance of having a regulatory framework that adequately protects investors. The rules we are proposing today would level the playing field in the security-based swap market by bringing needed transparency to this market and by seeking to ensure that customers in these transactions are treated fairly."
Commissioner Troy A. Paredes, whose statements include:
- Support for the proposal, but with a warning that special entities such as states, municipalities, pension plans, endowments and others may find it more difficult and costly to access the security-based swap market.
- Specific requests for comment on six issues.
- SEC Proposes Business Conduct Standards for Security-Based Swap Dealers and Major Security-Based Swap Participants. SEC. Retrieved on June 29, 2011.
- Speech by SEC Commissioner: Statement at Open Meeting to Propose Business Conduct Standards for Security-Based Swap Dealers and Major Security-Based Swap Participants. SEC. Retrieved on June 29, 2011.