SEC Adopts New Rules and Amendments under Title VII of Dodd-Frank

FOR IMMEDIATE RELEASE

2019-182

Washington D.C., Sept. 19, 2019 — The Securities and Exchange Commission today announced that it took a significant step toward establishing the regulatory regime for security-based swap dealers by adopting a package of rules and rule amendments under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). These actions establish recordkeeping and reporting requirements for security-based swap dealers and major security-based swap participants and amend the recordkeeping and reporting requirements for broker-dealers. Under these rules, these companies will be required to create and retain fundamental business records to document and track their operations, facilitating the Commission's ability to monitor compliance and reducing risk to the market.

"I once again would like to thank Commissioner Peirce for her excellent leadership of our efforts to stand up the Dodd-Frank Title VII regulatory regime. These rules will help the Commission ensure compliance with rules designed to promote financial responsibility and investor protection," said SEC Chairman Jay Clayton. "Also, I want to thank our colleagues at the SEC, including in the Division of Trading and Markets and the Division of Economic Risk and Analysis, as well as CFTC Chairman Tarbert, Commissioner Quintenz and their colleagues, for their efforts and commitments to inter-agency cooperation."

"With these rules that we finalized, the Commission has taken another important step toward the registration and regulation of security-based swap dealers and major security-based swap participants and the full implementation of the regulatory framework mandated by Congress in Title VII of the Dodd-Frank Act. These rules reflect the hard work of our staff in Trading and Markets and DERA and are the product of ongoing close cooperation with our colleagues at the CFTC, including Chairman Tarbert and Commissioner Quintenz," said SEC Commissioner Hester Peirce.  "I am particularly pleased to see the alternative compliance mechanisms built into the final rule."

These rules address seven key areas:

The accompanying fact sheet describes the rules in more detail.

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FACT SHEET

Final Rules and Amendments

Sept. 19, 2019

The Commission adopted a package of new rules and rule amendments to establish recordkeeping and reporting requirements under Title VII of the Dodd-Frank Act.  

RECORDKEEPING AND REPORTING RULES FOR SBSDs, MSBSPs, AND BROKER-DEALERS

The Scope of the Rules

Record Making Requirements

Record Preservation Requirements

Periodic Reporting and Annual Audit Requirements

Early Warning Notification

Security Counts

Rule 17a-13 requires a broker-dealer on a quarterly basis to examine and count the securities it physically holds, account for the securities that are subject to its control or direction but are not in its physical possession, verify the locations of securities under certain circumstances, and compare the results of the count and verification with its records. Broker-dealer SBSDs and MSBSPs will be subject to this rule.  New Rule 18a-9 will require stand-alone SBSDs to perform a quarterly securities count.

Alternative Compliance Mechanism

Rule 18a-10 provides that an SBSD that is not a registered broker-dealer and is registered as a swap dealer and predominantly engages in a swaps business may elect to comply with the capital, margin and segregation requirements of the Commodity Exchange Act and the CFTC's rules instead of complying with the capital, margin, and segregation rules of the Commission if certain conditions are met.  This rule has been amended to provide that the SBSD also may elect to comply with the recordkeeping and reporting requirements of the Commodity Exchange Act and the CFTC's rules instead of complying with the recordkeeping and reporting rules of the Commission.

Cross-Border Application

The Commission's cross-border rule has been amended to permit foreign SBSDs and MSBSPs to avail themselves of substituted compliance to satisfy the recordkeeping and reporting requirements.

What's Next?

The rules will become effective 60 days after publication in the Federal Register. The compliance date for the rule amendments and new rules is 18 months after the effective date of any final rules addressing the cross-border application of certain security-based swap requirements. 

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