Comments on the SEC’s proposed Prohibition Against Undue Influence over Chief Compliance Officers rule (SIFMA, IIB, and ISDA)
Summary
SIFMA, IIB and ISDA provided comments to the SEC on protections for chief compliance officers against coersion, manipulation, misleading or fradulent influence (Rule 15Fh-4(c)).
Excerpt
March 21, 2022
Vanessa Countryman, Secretary
Securities and Exchange Commission
100 F Street NE
Washington, DC 20549-1090
Re: Notice of Proposed Rulemaking on the Prohibition Against Fraud, Manipulation, or Deception in Connection with Security-Based Swaps; Prohibition Against Undue Influence over Chief Compliance Officers;
Position Reporting of Large Security-Based Swap Positions (File No. S7-32-10)
Dear Ms. Countryman:
The Institute of International Bankers (“IIB”), the International Swaps and Derivatives Association (“ISDA”), and the Securities Industry and Financial Markets Association (“SIFMA”) (together, the “Associations”)1 appreciate the opportunity to provide comments to the Securities and Exchange Commission (the “Commission” or “SEC”) on the proposed additional protections for chief compliance officers (“CCOs”), set forth in proposed Rule 15Fh-4(c) under the Securities Exchange Act of 1934 (the “Exchange Act”), as reflected in the above-captioned proposed rulemaking (the “Proposed Rule”).2
Proposed Rule 15Fh-4(c) would prohibit any officer, director, supervised person or employee of security-based swap (“SBS”) dealer or major SBS participant (each, an “SBS Entity”) from taking any action, directly or indirectly, to “coerce, manipulate, mislead, or fraudulently influence” an SBS Entity’s CCO.3 We support the Commission’s objective of fostering compliance with the securities laws and supporting the integrity of the SBS markets by protecting the independence of an SBS Entity’s CCO.
However, the scope of Proposed Rule 15Fh-4(c) is unclear and could lead to confusion and uncertainty in the market as to which activities are prohibited. Not only are the actions that are prohibited by the text of the rule vague and undefined—for example, it is not clear what it means to “coerce” a CCO—the Commission’s description 1 Descriptions of the Associations are included in the attached Appendix.
2 SEC Release No. 34-93784 (December 15, 2021), 87 Fed. Reg. 6652 (February 4, 2022).
3 Proposed Rule 240.15Fh-4(c).