Alert July 05, 2011

SEC Proposes Business Conduct Standards for Security Based Swap Dealers and Major Security-Based Swap Participants

The SEC issued proposed rules that would impose certain business conduct standards upon security-based swap dealers (“SBS Dealers”) and major security-based swap participants “Major SBS Participants”) when those parties engage in security-based swap (“SBS”) transactions.  The proposed rules are designed to implement the SEC’s oversight of SBSs pursuant to the Dodd-Frank Act.  Under the proposed rules, SBS Dealers and Major SBS Participants would be required 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 certain entities such as municipalities, pension plans, endowments and similar entities.  Comments on the proposed rules must be received by August 29, 2011.