SEC-CFTC Harmonization: Key Issues under Title VII of the Dodd-Frank Act
Summary
The matrix below summarizes key issues raised as a result of differences between the rules adopted or proposed by the Securities and Exchange Commission and the Commodity Futures Trading Commission (“CFTC”) to implement the regulatory framework for security-based swaps (“SBS”) and swaps under Title VII of the Dodd-Frank Act. Because most of the CFTC’s Title VII rules have been in effect for several years, but the SEC’s Title VII rules are either awaiting adoption or are not yet in effect, greater harmonization of the SEC’s rules to the CFTC’s rules would help facilitate prompt implementation of the SEC’s Title VII regime with minimal disruption to the SBS market and robust protections and lower costs for investors and other end-users. Accordingly, in several instances, our recommendations call for such harmonization even if the SEC’s rules would, standing alone, be less strict or costly than the CFTC’s rules. We also note some key areas where changes to the CFTC’s rules or guidance would be appropriate. Our recommendations cover the following areas:
• Conflicts with foreign blocking, privacy, secrecy, labor and employment laws raised by certifications and legal opinions required for foreign dealers, background checks for associated persons, and trade reporting rules;
• The treatment of transactions between non-U.S. persons arranged, negotiated or executed by personnel or agents located in the U.S.;
• Trade reporting data fields, mechanics, and cross-border application;
• External business conduct standards; and
• Capital, margin, and segregation rules.1
Excerpt
SEC-CFTC Harmonization:
Key Issues under Title VII of the Dodd-Frank Act
The matrix below summarizes key issues raised as a result of differences between the rules adopted or proposed by the Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”) to implement the regulatory framework for security-based swaps (“SBS”) and swaps under Title VII of the Dodd-Frank Act. Because most of the CFTC’s Title VII rules have been in effect for several years, but the SEC’s Title VII rules are either awaiting adoption or are not yet in effect, greater harmonization of the SEC’s rules to the CFTC’s rules would help facilitate prompt implementation of the SEC’s Title VII regime with minimal disruption to the SBS market and robust protections and lower costs for investors and other end-users. Accordingly, in several instances, our recommendations call for such harmonization even if the SEC’s rules would, standing alone, be less strict or costly than the CFTC’s rules. We also note some key areas where changes to the CFTC’s rules or guidance would be appropriate. Our recommendations cover the following areas:
• Conflicts with foreign blocking, privacy, secrecy, labor and employment laws raised by certifications and legal opinions required for foreign dealers, background checks for associated persons, and trade reporting rules;
• The treatment of transactions between non-U.S. persons arranged, negotiated or executed by personnel or agents located in the U.S.;
• Trade reporting data fields, mechanics, and cross-border application;
• External business conduct standards; and
• Capital, margin, and segregation rules.1