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SEC adopts first instalment of rules for cross-border security-based swap activity

The Securities and Exchange Commission (SEC) re-started its rulemaking for security-based swaps (SBS) under the Dodd-Frank Act by adopting a first instalment of rules that are applicable to SBS involving persons and entities located outside the US.

According to an advisory from law firm Katten Muchin Rosenman, the SEC took into consideration many of the comments made on the proposed cross-border rules it issued in 2012, so the rules are different in numerous ways from the proposed rules.
 
The rules are broadly consistent with the positions taken by the Commodity Futures Trading Commission (CFTC) in its “Interpretive Guidance and Policy Statement Regarding Compliance with Certain Swap Regulations”, but they are formal rules rather than mere guidance.
 
Although the rules will become effective on 7 September 2014, market participants will not have to comply with them until the SEC adopts the rest of the substantive rules necessary to complete the regulatory regime for security-based swaps created by the Dodd-Frank Act.
 
In the meantime, the most active market participants can use the rules to estimate more accurately the possibility of needing to register with the SEC because of their SBS activity.

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