SEC Issues “Roadmap” on Phase in of Derivatives Regulation

The Securities and Exchange Commission has issued a policy statement describing the order in which it expects new rules regulating the derivatives market would take effect. The statement covers final rules to be adopted by the SEC under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act

Title VII of the Dodd-Frank Act establishes a comprehensive framework to regulate over-the-counter derivatives, authorizing the Commodity Futures Trading Commission to regulate “swaps,” and the SEC to regulate “security-based swaps.”

The SEC is requesting public comment on its plan to phase in final rules regulating security-based swaps and security-based swap market participants. The policy statement does not estimate when the rules would be put in place, but describes the sequence in which they would take effect. The phased-in approach is intended to avoid the disruption that could occur if all the new rules took effect simultaneously. To date, the Commission has proposed nearly all the rules required under the Act and already has begun to adopt those rules.

“The policy statement seeks to provide a ‘roadmap’ to market participants and the public on how we expect to implement the various regulatory requirements for this market,” said Chairman Mary L. Schapiro. “We look forward to public comment on our anticipated sequencing as we continue to adopt and implement the rules under the law.”

In addition, the policy statement discusses the timing of the expiration of the temporary relief the SEC previously granted to securities-based swaps market participants. The relief exempts these market participants from certain provisions of the Securities Act of 1933, the Securities Exchange Act of 1934, and the Trust Indenture Act of 1939. Much of this relief is due to expire when certain final rules under Title VII become effective.

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