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SEC chairman testifies on steps taken to to reduce systemic risk in the U.S. capital markets

  • Speech — gray Image

Jul 30, 2013

SEC Chairman Mary Jo White testified before the U.S. Senate Committee on Banking, Housing, and Urban Affairs about the steps taken by the SEC to reduce systemic risk in the U.S. capital markets. In particular, she addressed the actions taken by the SEC to support the provisions of the Dodd-Frank Act.

Some of these actions included the following:

Over-the-Counter Derivatives

The SEC has (1) proposed substantially all of the core rules required by Title VII of the Dodd-Frank Act, (2) adopted a number of final rules and interpretations, (3) provided a roadmap to implement Title VII and to inform market participants of the sequence in which the new requirements will become effective and how the proposed rules would apply in a cross border context, and (4) taken other actions to provide legal certainty to market participants during the implementation process. 

Financial Market Utilities

The SEC has created enhanced standards for systemically important financial market utilities and adopted clearing agency standards.

Form PF: Systemic Risk Reporting by Advisers to Private Funds

The SEC has been developing a secure filing environment for Form PF to comply with the confidentiality provisions under the Dodd-Frank Act. For example, Ms. White noted that the SEC will implement controls and systems to handle the data across the agency and to deliver the data electronically to the Office of Financial Research within the Department of the Treasury.

The Volcker Rule

In October 2011, the federal banking agencies and SEC jointly proposed rules to implement the Volcker Rule. Ms. White noted that the SEC has received nearly 19,000 comment letters in response to the proposal and will continue to engage in consultation with other federal financial regulators to develop recommendations for implementing the Volcker Rule.

Credit Rating Agencies

The Dodd-Frank Act required the SEC to undertake a number of rulemakings related to credit rating agencies registered as nationally recognized statistical rating organizations. The SEC has proposed a series of rules intended to strengthen the integrity of credit ratings by, among other things, improving the transparency of ratings methods and performance.

Prohibition Against Conflicts of Interest in Certain Securitizations

In September 2011, the SEC proposed a rule to implement Section 621 of the Dodd-Frank Act, which prohibits entities that create and distribute asset-backed securities from engaging in transactions that involve or result in material conflicts of interest with respect to the investors in such asset-backed securities. The proposed rule would prohibit underwriters, placement agents, initial purchasers, and sponsors of an asset-backed security, among others, from engaging in any transaction that would involve or result in any material conflicts of interest with respect to any investor in the relevant asset-backed security.

Orderly Liquidation Authority

Under Title II of the Dodd-Frank Act, the SEC and the Federal Deposit Insurance Corporation are required to develop joint rules governing the orderly liquidation of broker-dealers. Ms. White noted that the SEC staff is working to prepare a recommendation.

The testimony is available on the SEC’s website.

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