SEC Proposes Swap Recordkeeping and Reporting Rules

April 16, 2014

The SEC proposed the last set of rules for swaps as required by the Dodd-Frank Act. The proposed rules cover recordkeeping, reporting, and notification requirements for security-based swap dealers and major security-based swap participants and would establish additional recordkeeping requirements for broker-dealers to account for their security-based swap activities.

The 500 plus page release proposes:

recordkeeping, reporting, and notification requirements applicable to security-based swap dealers (SBSDs) and major security-based swap participants (MSBSPs),

securities count requirements applicable to certain SBSDs, and

additional recordkeeping requirements applicable to broker-dealers to account for their security-based swap and swap activities.

In 2010, Title VII of the Dodd-Frank Act established a new regulatory framework for the over-the-counter (OTC) derivatives markets that reduces risk, increases transparency and promotes market integrity within the financial system. Key parts of Title VII required:

the registration and regulation of SBSDs and MSBSPs;

clearing and trade execution requirements on swaps and security-based swaps;

new SEC rulemaking and enforcement authorities with respect to all registered entities and intermediaries subject to the SEC’s oversight; and

recordkeeping and real-time reporting regimes.

The rules proposed on April 15th address the latter. They are modeled on certain existing broker-dealer rules, including Securities Exchange Act of 1934 Rules 17a–3, 17a–4, 17a–5, 17a–11, and 17a–13, as well as the FOCUS Report.

In the proposing release, the SEC noted that while the proposed recordkeeping, reporting, notification, and securities count rules are modeled on the broker-dealer rules, stand-alone SBSDs and stand-alone MSBSPs will not engage in the same range of activities permitted of broker-dealers. For example, broker-dealers are permitted to act as dealers with respect to all types of securities, whereas stand-alone SBSDs would be permitted to act as dealers only with respect to security-based swaps and stand-alone MSBSPs would not be permitted to act as dealers with respect to any types of securities.

Click here to access the press release announcing the proposed rules.


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