Crickets and Dodd Frank what do they have in common?

Curious?

A cricket will rub its hind legs together and produce a chirping sound at night.  In mass it is almost a soothing sound that will lull you to sleep. (BTW one in your house can drive you mad).  It also is sometimes analogous to dead silence.  Well now I put to you, the incredible stir that the Dodd-Frank Wall Street reform bill had a year ago when a Democratic congress passed it and the president signed it into law.  One year has passed and the I ask you what happened to the teeth of this law. Dead Silence. 

Registration has been delayed rules have been watered down and the SEC has yet to really come out with a game plan for moving forward.  The house of Reps. has shifted and the law is in jeopardy of being repealed in part or whole. So is it no wonder that Hedge Funds, Private Equity firms as well as the derivative trading firms are sitting  back to see what finally happens.

The SEC really dropped the ball on this one.  They were slow with finalizing the rules (which in fact are probably a year from being finalized) and apparently bent to political pressures. So Firms are still  unregulated and the SEC is all talk and no action.  Nothing will happen over the next month and a half with congress on break, elections to think about and the 14.3 trillion dollar deficit to worry about.  So I will be back when there is something to really to discuss.

Thanks

New Swap proposal under Article VII

On June 29, 2011 the Securities and Exchange Commission today voted to propose rules that would impose certain business conduct standards upon security-based swap dealers and major security-based swap participants when those parties engage in security-based swap transactions. The SEC’s proposed rules stem from Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

“The rules we are proposing 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,” said SEC Chairman Mary L. Schapiro. “The standards we propose are intended to establish a framework that protects investors and also promotes efficiency, competition, and capital formation.”

The proposed rules would require security-based swap dealers and major security-based swap participants to communicate in a fair and balanced manner and make certain disclosures, including conflicts of interest and material incentives to potential counterparties.

Proposal

• Verify whether a counterparty is an eligible contract participant and whether it is a special entity.
• Disclose to the counterparty material information about the security-based swap, including material risks, characteristics, incentives and conflicts of interest.
• Provide the counterparty with information concerning the daily mark of the security-based swap.
• Provide the counterparty with information regarding the ability to require clearing of the security-based swap.
• Communicate with counterparties in a fair and balanced manner based on principles of fair dealing and good faith.
• Establish a supervisory and compliance infrastructure.
• Designate a chief compliance officer that is required to fulfill the described duties and provide an annual compliance report.

The proposed rules also would require security-based swap dealers to:

Make reasonable efforts to obtain information that it needs to determine that the recommendation is in the “best interests” of the special entity.

In addition, the proposed rules would require security-based swap dealers and major security-based swap participants acting as counterparties to special entities to reasonably believe that the counterparty has an independent representative who meets the following requirements:

•     Has sufficient knowledge to evaluate the transaction and risks.
•     Is not subject to a statutory disqualification.
•     Is independent of the security-based swap dealer or major security-based swap participant.
•     Undertakes a duty to act in the best interests of the special entity.
•     Makes appropriate disclosures of material information concerning the security-based swap.
•     Provides written representations to the special entity regarding fair pricing and   appropriateness of the security-based swap.