Completing Dodd-Frank rules, including those governing cross-border swaps, tops the U.S. Securities and Exchange Commission’s agenda this year, SEC Chairman Elisse Walter said today.
The 2010 Dodd-Frank overhaul of financial regulation required the SEC and the Commodity Futures Trading Commission to draft rules to increase transparency in the swaps market. The SEC’s rules would address the overseas reach of regulations governing security-based swaps. The agencies missed a July 2011 deadline to complete most of their Dodd-Frank regulations.
Walter said finishing Dodd-Frank rules would lead her agenda as the commission, divided between two Democrats and two Republicans, tries to move forward under her leadership.
“That is what is first on the agenda and really stands as the most important thing we have to do as a prelude to adopting anything else,” Walter told the SEC’s Investor Advisory Committee today in Washington. “We will put that out for robust public comment.”
Walter described the swap rules as “the critical linchpin” of Dodd-Frank because of the “global nature of the market.”
Until Dodd-Frank was enacted in 2010, swaps were largely unregulated, often uncleared and traded directly between banks and other consumers of derivatives. Dodd-Frank requires traders including Goldman Sachs Group Inc. and JPMorgan Chase & Co. to have most swaps cleared and traded on exchanges or swap- execution facilities.
Walter declined to say when the commission would propose the rules. She also said she would prioritize rules required by the so-called JOBS Act, which sought to ease access to capital for startup firms and small businesses.
The SEC in August proposed a rule mandated by the 2012 measure to lift a ban on mass marketing by hedge funds and other private offerings. Some consumer groups want Walter to add investor protections to a final rule, including a means to verify that that investors are sophisticated enough to participate in private offerings.
The SEC’s two Republican commissioners have said the ban should be lifted without imposing new restraints. Democratic Commissioner Luis A. Aguilar voted against the August proposal over concerns that it opened up vulnerabilities for investors.
“Chairman Walter is on the hot seat,” said Barbara Roper, director of investor protection for the Consumer Federation of America. “She’s going to make someone really angry no matter what she does.”
Walter said the commission would lift the ban and was still considering the details of a final rule.
“Once a statute is passed, we will carry it out,” she said. “It is not our job to undo congressional determinations.”