The Securities and Exchange Commission (SEC) has adopted new recordkeeping and reporting rules for security-based swap dealers and major-based swap participants which increase the need of tracking.
These changes come under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Under the rules, these companies will need to create and retain fundamental business records to document and track their operations, facilitating the commission’s ability to monitor compliance and lower risk in the market.
There are seven areas addressed by the new rules. The first is they establish record making requirements for security-based swap dealers (SBSDs) and major security-based swap participants (MSBSPs). They also amend existing record making requirements for broker-dealers to account for their security-based swap activities.
Another change is record preservation requirements for SBSDs and MSPSPs as well as existing record preservation requirements for broker-dealers to address records relating to security-based swap activities. It also is establishing periodic reporting and annual audit requirements for these companies.
SEC has implemented early warning notifications and security count requirements.
Finally, the regulator has altered a rule which permits certain SBSDs which are registered as swap dealers and predominantly engage in swap business to comply with CFTC requirements in lieu of the SEC requirements.
SEC Commissioner Hester Peirce said, “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 our staff in Trading and Markets and DERA and are the product of ongoing close cooperation with our colleagues at the CFTC, including Chairman Tarbert and Commissioner Quintenz. I am particularly pleased to see the alternative compliance mechanisms built into the final rule.”
The new rules will come into effect 60 days after publication in the Federal Register. A compliance date for these changes will be set for 18 months after this.
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