UNITED STATES: SEC Adopts New Rules and Amendments under Title VII of Dodd-Frank

Monday September 23 2019

On 19^th September 2019, the Securities and Exchange Commission (SEC) announced that it took a significant step toward establishing the regulatory regime for security-based swap dealers by adopting a package of rules and rule amendments under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). These actions establish recordkeeping and reporting requirements for security-based swap dealers and major security-based swap participants and amend the recordkeeping and reporting requirements for broker-dealers.

Under these rules, these companies will be required to create and retain fundamental business records to document and track their operations, facilitating the Commission’s ability to monitor compliance and reducing risk to the market.

With these rules that we finalized, the Commission has taken another important step toward the registration and regulation of security-based swap dealers and major security-based swap participants and the full implementation of the regulatory framework mandated by Congress in Title VII of the Dodd-Frank Act.

These rules reflect the hard work of SEC staff in Trading and Markets and DERA and are the product of ongoing close cooperation with colleagues at the CFTC.

These rules address seven key areas:

• They establish record making requirements for security-based swap dealers (SBSDs) and major security-based swap participants (MSBSPs) and amend the existing record making requirements for broker-dealers to account for their security-based swap activities.
• They establish record preservation requirements for SBSDs and MSBSPs and amend the existing record preservation requirements for broker-dealers to address records relating to their security-based swap activities.
• They establish periodic reporting and annual audit requirements for SBSDs and MSBSPs and amend the existing reporting requirements for broker-dealers to account for their security-based swap activities.
• They establish early warning notification requirements for SBSDs and MSBSPs.
• They establish security count requirements for SBSDs that are not registered as broker-dealers and do not have a prudential regulator (stand-alone SBSDs).
• They amend the Commission’s existing cross-border rule to provide a means to request substituted compliance with respect to the recordkeeping and reporting requirements for SBSDs and MSBSPs.
• They amend a rule that permits certain SBSDs that are registered as swap dealers and predominantly engage in a swaps business to comply with CFTC requirements in lieu of Commission requirements. The amendment adds the recordkeeping and reporting requirements being adopted today to this alternative compliance mechanism.

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