Alert June 19, 2012

SEC Releases Statement on Anticipated Sequencing of Dodd-Frank Rules for Security-Based Swaps

The SEC has released a statement of general policy discussing its anticipated sequencing of compliance dates for final rules to be adopted by the SEC pursuant to the Dodd-Frank Act that focus primarily on security-based swaps and security-based swap market participants.

The statement groups the rules into five categories:

(1) Entity definition rules, product definition rules, and rules concerning the treatment of cross-border security-based swap transactions and certain non-US persons.

(2) Rules pertaining to security-based swap data repositories and the public dissemination of security-based swap transaction data.

(3) Rules pertaining to clearing.

(4) Rules pertaining to the registration and regulation of security-based swap dealers and major security-based swap participants.

(5) Rules pertaining to the mandatory trading of security-based swap transactions, including rules pertaining to security-based swap execution facilities.

The statement notes that the rules in the first category affect compliance with those in the other four categories, and therefore that the rules in the first category would generally need to be adopted and effective prior to the compliance dates for rules in the remaining four categories.  As a result, the rules in the first category would generally be adopted earlier than those in the other categories.  This contrasts with the approach taken by the CFTC, which has already finalized a number of rules whose effective or compliance dates are delayed until certain other rules are finalized, and which in some cases cannot be fully understood until such subsequent rules are adopted.  The SEC’s statement also indicates that comments received on rules in the first category could provide insights relevant to the formulation of rules in the remaining categories. 

Although the statement does not provide specific compliance dates for any of the rules and does not provide a conclusive sequence of compliance dates, it does, in its own words, “explain how such dates could be sequenced in relative terms and, in this way, seeks to give security-based swap market participants clarity into and an opportunity to comment upon the general order in which they might expect to consider and prepare for compliance with these final rules.”  The statement notes that the SEC was guided by various principles, such as the intent to prioritize compliance with final rules involving swap data reporting so that the SEC could utilize the analysis of such data in subsequent rule-making, and the desire to provide regulated entities with “adequate, but not excessive” time to comply with rules applicable to them.

The SEC has invited public comment on the statement, and has asked a number of specific questions throughout the statement to solicit public input.  Public comments are due by August 13, 2012.