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    SEC Finalizes Requirements Under Regulatory Regime for Swaps

    December 16, 2019

    SEC has now published, in Federal Register, the final rule adopting 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. Earlier, in September 2019, SEC had announced that it took a significant step toward establishing the regulatory regime for security-based swap dealers (SBSDs) by adopting a package of rules and rule amendments under Title VII of the Dodd-Frank Act. The final rule will become effective on February 14, 2020. The compliance date for the rule amendments and new rules is 18 months after the effective date of any final rules addressing the cross-border application of certain security-based swap requirements.

    Under these rules, the entities 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. The cross-border rule of SEC has been amended to permit foreign SBSDs and MSBSPs to avail themselves of substituted compliance to satisfy the recordkeeping and reporting requirements. The final rule addresses seven key areas:

    • They establish record making requirements for SBSDs and 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 existing cross-border rule of SEC 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 SEC requirements. The amendment adds the recordkeeping and reporting requirements being adopted now to this alternative compliance mechanism. 

     

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    Effective Date: February 14, 2020

    Keywords: Americas, US, Banking, Securities, Swaps, SBSD, MSBSP, Dodd-Frank Act, CFTC, SEC

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