Business Conduct Standards for Security-Based Swaps Dealers and Major Security-Based Swap Participants

The Asset Management Group (AMG) of SIFMA provides comments to the Securities and Exchange Commission (SEC) on business conduct standards for security-based swap dealers (SBS dealers) and major security-based swap participants (MSBSP), File No. S7-25-11.  SIFMA AMG believes the SEC proposal for a business conduct standards rule is more suitable for Special Entities such as Employee Retirement Income Security Act of 1974 (ERISA) plans, governmental plans, endowments, and federal agencies, than the one proposed by the Commodity Futures Trading Commission (CFTC).  SIFMA AMG provided comments to the CFTC on its proposal on February 22, 2011.

SIFMA AMG feels that the SEC should further expand and clarify the exclusion of SBS dealers and MSBSP from any advisory relationship to the Special Entity if the Special Entity so chooses.  Any classification of SBSD/MSBSP as advisors would likely cause these entities to refrain from transacting with Special Entities due to increased regulation and potential litigation.  Asset Managers are also concerned that certain disclosures by the dealer, including scenario analyses and risks of each trade, may cause execution delays and increase costs for all parties.