Patrick Pearson, head of the European Commission’s financial markets infrastructure unit, said during testimony at a House hearing in December that regulators should aim for one set of rules in cross-border transactions. The CFTC’s version of substitute compliance was “too modest” and should be “applied more broadly,” Pearson said.
The SEC’s proposal raises the potential for risk flowing back to the U.S. because of its treatment of overseas affiliates and branches, said Commissioner Luis Aguilar, part of the Democratic majority on the five-member panel.
“Under the proposed rules, two non-guaranteed foreign subsidiaries of two separate U.S. entities could engage in unlimited amounts of security-based swap transactions with each other outside the United States,” Aguilar said at the meeting. “The proposed rules seem to assume that any failure by these foreign subsidiaries would not financially affect the U.S. parents.”
Barclays Plc, UBS AG, Credit Suisse Group AG and other overseas-based dealers began registering with U.S. regulators at the end of last year. CFTC Chairman Gary Gensler said his agency shouldn’t extend a July 12 deadline for other rules to take effect.
“I think that we’ve got a good approach at the CFTC, but also we have a different law than the SEC,” Gensler said yesterday after Bloomberg’s Washington Summit. “There may be differences.”
The CFTC is willing to work with overseas officials to determine when foreign rules are similar enough that U.S. regulators let them satisfy Dodd-Frank’s goals, he said.
“It’s been nine months that that guidance has been out there” he said. “It’s time for us to finish the deliberative process.”