SEC Proposes Rule Requiring Registration of Securities-Based Swap Dealers and Major Swap Participants

Published on: 14 Oct 2011

On October 12, 2011, the SEC issued a proposed rule that would implement Section 764(a) under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). The proposed rule would require security-based swap entities,1 including security-based swap dealers and major security-based swap participants (as each is defined in the proposed rule), to register with the SEC. Initially, the rule would allow security-based swap entities to conditionally register with the SEC on a provisional basis. The objective of the conditional registration is to allow the Commission to (1) consider a separate pending SEC proposal that would finalize the definition of a “security-based swap” and (2) take into account other changes that may result from the implementation of additional Title VII initiatives. In addition, by including a conditional registration process, the SEC aims to prevent entities that meet the current definition of security-based swap dealers and major swap participants from waiting to register and thus to give these entities enough time to register within the required time frame. Once definitions are finalized and all other Title VII rules are implemented, conditionally registered security-based swap entities could seek permanent registration by filing a certification with the SEC.

In addition to the registration rules, the proposal details new forms that would be used to execute the registration and withdrawal of swap-based entities with the SEC. Comments on the proposed rule are due by December 19, 2011.


[1] The “Dodd-Frank Act” divided authority over swap regulation between the SEC and the Commodity Futures Trading Commission. Under the law, the SEC is granted authority over security-based swaps. Currently, security-based swaps “are broadly defined as swaps based on (1) a single security or (2) a loan or (3) a narrow-based group or index of securities or (4) events relating to a single issuer or issuers of securities in a narrow-based security index.”

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