SEC Adopts Security-based Swap Reporting and Recordkeeping Regime under Dodd-Frank | Practical Law

SEC Adopts Security-based Swap Reporting and Recordkeeping Regime under Dodd-Frank | Practical Law

The SEC adopted Regulation SBSR and related rules, prescribing reporting and public dissemination requirements for security-based swap (SBS) transaction data. The SEC also proposed certain related rules and guidance.

SEC Adopts Security-based Swap Reporting and Recordkeeping Regime under Dodd-Frank

Practical Law Legal Update 6-596-0265 (Approx. 5 pages)

SEC Adopts Security-based Swap Reporting and Recordkeeping Regime under Dodd-Frank

by Practical Law Finance
The SEC adopted Regulation SBSR and related rules, prescribing reporting and public dissemination requirements for security-based swap (SBS) transaction data. The SEC also proposed certain related rules and guidance.
On January 14, 2015, the SEC announced the adoption of the following final rules:
  • Final rules prescribing reporting and public dissemination requirements for security-based swap (SBS) transaction data (referred to as Regulation SBSR).
  • Final rules requiring SBS data repositories (SBSDRs) to register with the SEC.
The SEC also proposed additional rules, rule amendments and guidance related to the reporting and public dissemination of SBS transaction data.
The final rules come shortly after calls for the SEC to accelerate the pace of its Dodd-Frank swaps rulemaking.
Regulation SBSR:
  • Outlines the information that must be reported and publicly disseminated for each SBS transaction (17 C.F.R. § 242.901 and 17 C.F.R. § 242.902).
  • Assigns reporting duties for many SBS transactions (17 C.F.R. § 242.901).
  • Requires SBSDRs registered with the SEC to establish and maintain policies and procedures for carrying out their duties under Regulation SBSR (17 C.F.R. § 242.907).
  • Recognizes the Global Legal Entity Identifier (GLEI) System as the system from which SBS counterparties must obtain codes to identify themselves when reporting SBS data (17 C.F.R. § 242.903) (see Legal Updates, FSB announces establishment of Global LEI Foundation and US Treasury Releases Plan for LEIs (Legal Entity Identifiers)).
  • Adopts a substituted compliance framework to permit market participants to satisfy their obligations under Regulation SBSR through compliance with the comparable regulation of a foreign jurisdiction (17 C.F.R. § 242.908(c)). Provided that at least one direct counterparty to the SBS is either a non-US person or a foreign branch, the SEC may issue a substituted compliance determination regarding regulatory reporting or public dissemination of SBS if it finds that the corresponding requirements of the foreign regulatory system are both:
    • comparable to the relevant provisions of Regulation SBSR; and
    • accompanied by an effective supervisory and enforcement program administered by the relevant foreign authorities.
Among other provisions, the final rules relating to SBSDRs:
  • Impose civil liability upon SBSDR executives (officers, directors and employees) for directly or indirectly taking any action to coerce, manipulate, mislead or fraudulently influence their chief compliance officer (CCO) in the performance of his or her duties to annually prepare and sign a report that contains a description of compliance of the SBSDR with the final rules (17 C.F.R. § 240.13n–11(h)).
  • Place sole responsibility on the SBSDR board for the compensation, appointment and removal of its CCO. The compensation, appointment and removal of the CCO requires the approval of a majority of the SBSDR's board (17 C.F.R. § 240.13n–11(a)).
  • Require SBSDRs to register with the SEC (17 C.F.R. § 240.13n–1).
  • Provide an exemption from registration (under 17 C.F.R. § 240.13n–12) for certain non-US SBSDRs, provided that each regulator with supervisory authority over the non-US SBSDR has entered into a memorandum of understanding or other arrangement with the SEC that addresses:
    • the confidentiality of data collected and maintained by the non-US SBSDR;
    • the SEC's access to that data; and
    • any other matters determined by the SEC.
The SEC initially proposed Regulation SBSR in November 2010 (see Legal Update, SEC Proposes Rules on Security-Based Swap Reporting and Data Repositories Under the Dodd-Frank Act). In May 2013, the SEC re-proposed the entirety of Regulation SBSR as part of its cross-border proposal (see Legal Update, SEC Proposes Substituted Compliance for Cross-border Security-based Swaps under Dodd-Frank), which proposed rules and interpretations regarding the application of Title VII of the Dodd-Frank Act to cross-border SBS activities. In connection with final Regulation SBSR, the SEC is also now proposing new Regulation SBSR rules as well as amendments to, and guidance regarding Regulation SBSR, as adopted. The SEC proposed amendments to Regulation SBSR would:
  • Assign reporting duties for certain SBS not addressed by the adopted rules.
  • Prohibit registered SBSDRs from charging fees to or imposing usage restrictions on the users of publicly disseminated SBS transaction data.
  • Provide a compliance schedule for certain provisions of Regulation SBSR.
The rules omit certain major elements of the CFTC's swap data reporting regime, including real-time reporting, and the SEC rules do not define the term "block trade," which, under CFTC rules, is a large trade typically reported with a lag time so as not to be identifiable (see Practice Note, US Derivatives Regulation: CFTC Swap Data Reporting and Recordkeeping Rules: Final CFTC "Block Trade" Rules).

Compliance Dates and Comment Period

On March 19, 2015, the SEC published these rules in the Federal Register, setting compliance dates for the final rules and a comment period for the proposed rule and guidance.
The final rules are technically effective on May 18, 2015. However, compliance is required as of:
The SEC is also requesting comments on its Proposed Rule and Guidance on the Reporting and Dissemination of SBS Information. All comments are due on or before May 4, 2015. Paper comments should be addressed to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. Online submission can be sent by using the SEC's internet comment form (http://www.sec.gov/rules/proposed.shtml), or by sending an email to [email protected]. All submissions should refer to File Number S7-03-15, and this File Number should be included on the subject line if email is used.
For further details on the final rules, see Practice Note, US Derivatives Regulation: SEC Regulation SBSR Data Reporting for Security-based Swaps.
This Update is based, in part, on material provided by the Accelus service Compliance Complete (http://accelus.thomsonreuters.com/products/accelus-compliance-complete), which provides regulatory news, analysis, rules and developments, with global coverage of more than 400 regulators and exchanges.