Speech by SEC Chairman:
Opening Statement at SEC Open Meeting
by
Chairman Mary Schapiro
U.S. Securities and Exchange Commission
Washington, D.C.
June 29, 2011
Good morning. This is an Open Meeting of the United States Securities
and Exchange Commission on June 29, 2011.
Today, we will consider proposing new rules that would establish
business conduct standards for security-based swaps dealers and major
security-based swap participants.
As with our prior proposals regarding security-based swaps, today’s
proposal stems from Title VII of the Dodd-Frank Wall Street Reform and
Consumer Protection Act. That Act authorizes the Commission to implement a
comprehensive framework for regulating the over-the-counter swaps markets.
In laying the groundwork for this new regulatory regime, Congress
recognized the importance of having a regulatory framework that adequately
protects investors. The rules we are proposing today would level the
playing field in the security-based swap market by bringing needed
transparency to this market and by seeking to ensure that customers in
these transactions are treated fairly.
Among other things, the proposed rules would require security-based
swap dealers and major security-based swap participants to communicate in
a fair and balanced manner and to disclose conflicts of interest and
material incentives to potential counterparties. Additional requirements
would be imposed for dealings with special entities, which include
municipalities, pension plans, endowments and similar entities.
In particular, when acting as a counterparty to a special entity, a
security-based swap dealer or major security-based swap participant would
need to have a reasonable basis to believe that the special entity has a
qualified independent representative that can help it assess the
transaction. In addition, a security-based swap dealer that is acting as
an advisor to a special entity would need to act in the best interests of
the special entity.
The standards we propose today are intended to establish a framework
that protects investors and also promotes efficiency, competition, and
capital formation. They are also intended to take into account the nature
of the security-based swap market and existing business conduct
requirements applicable for broker-dealers and other market participants.
In this regard, the Commission staff has worked closely with CFTC staff in
consulting with the public and other regulators including the Department
of Labor. Indeed, we have had dozens of meetings with a broad range of
interested parties including regulated entities, consumer and investor
advocates, institutional investors, financial institutions, endowments,
SROs, state and local governments, and end-users.
We look forward to public comment on today’s proposed rules. We welcome
and need the input of commenters, and we hope they will provide analysis,
data, and other information to help the Commission further evaluate the
proposal and make any appropriate changes.
Before I ask Robert Cook, Director of the Division of Trading and
Markets, and Lourdes Gonzalez, Co-Acting Chief Counsel of the Division of
Trading and Markets, to discuss the proposed rules, I would like to
express my thanks to the CFTC for their effort in crafting these proposed
rules along with our team at the SEC.
I would also like to thank Robert, as well as James Brigagliano,
Lourdes Gonzalez, Joanne Rutkowski, Cindy Oh, Leila Bham, Jack Habert,
Peter Curley, Tom Eady, Gregg Berman, Catherine McGuire, and David Sanchez
from the Division of Trading and Markets for their tremendous work on this
rulemaking.
Thanks as well to David Blass, Bob Bagnall and Jeff Berger from the
Office of the General Counsel; Scott Bauguess, Burt Porter and Adam Glass
from the Division of Risk, Strategy, and Financial Innovation; Amy Starr
and Tamara Brightwell from the Division of Corporation Finance; and
Douglas Scheidt from the Division of Investment Management.
Finally, I would like to thank the Commissioners and all of our
counsels for their work and comments on the proposed rules.
Now I'll turn the meeting over to Robert Cook to hear more about the
Division's recommendations.
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