SEC Announces Steps to Address One-Year Effective Date of Title VII of Dodd-Frank Act

Relief is on the way for SWAPS

On June 10, 2011 the SEC indicated they will take a series of actions in the coming weeks to clarify the requirements that will apply to security-based swap transactions as of July 16 (the effective date of Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act) and to provide appropriate temporary relief.

Title VII is the portion of the Dodd-Frank Act that establishes a comprehensive framework for regulating over-the-counter derivatives. In particular, it authorizes the SEC to regulate “security-based swaps” while also authorizing the CFTC to regulate other swaps.

The portion of Title VII referred to as Subsection B, which deals with the new regulatory regime for security-based swaps, will take effect on July 16 (360 days after the date of the Dodd-Frank Act’s enactment).

The SEC will:

1. "Provide guidance regarding which provisions of Subtitle B of Title VII will become operable as of July 16, and, where appropriate, provide temporary relief from several of these provisions.
2. Provide guidance regarding  and where appropriate, temporary relief from – the various pre-Dodd-Frank provisions of the Exchange Act that would otherwise apply to security-based swaps on July 16. Under Dodd-Frank, security-based swaps would be included in the definition of “security” under the Exchange Act. While such swaps will be subject to provisions addressing fraud and manipulation, the Commission intends to provide temporary relief from certain other provisions of the Exchange Act so that the industry will have time to seek, and the Commission can consider, what if any further guidance or action is required.
3. Take other actions such as extending existing temporary rules under the Securities Act, the Exchange Act, and the Trust Indenture Act, and extending existing temporary relief from exchange registration under the Exchange Act. This will help to continue facilitating the clearing of certain credit default swaps by clearing agencies functioning as central counterparties."