Thursday, March 03, 2011

SEC Chair Pledges Consistent Cross-Border Derivatives Regulation in Senate Testimony

As the SEC and CFTC implement the derivatives regulatory regime mandated by the Dodd-Frank Act, SEC Chair Mary Schapiro pledged to consult with non-US securities and financial regulators in an effort to promote consistent standards and avoid conflicting requirements, where possible. In testimony before the Senate Agricultural Committee, she also said that, in proposing margin rules, the SEC will be mindful both of the importance of security-based swaps as hedging tools for commercial end users and also of the need to set prudent risk rules for dealers in these instruments.

The SEC recognizes that other jurisdictions are also developing regulatory frameworks that will address many of the areas covered by Title VII. The manner and extent to which the SEC and foreign regulators regulate derivatives will affect both U.S. and foreign entities and markets, testified Chairman Schapiro. Consequently, as the SEC progresses with the implementation of Title VII, she noted, the Commission will continue to consult with regulatory counterparts abroad in an effort to achieve consistent standards and avoid conflicting requirements, where possible.

The SEC and CFTC are, in fact, directed by Dodd-Frank to consult and coordinate with foreign regulators on the establishment of consistent international standards governing swaps, security-based swaps, swap entities, and security-based swap entities. The SEC believes that bilateral discussions with foreign regulators, as well as the agency’s engagement in the recently-formed IOSCO Task Force on OTC Derivatives Regulation, which the SEC co-chairs, and participation in other international forums, will help achieve this goal.

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