SEC Provides Guidance on Swaps Requirements

June 17, 2011 ( - The Securities and Exchange Commission has provided guidance on the timing of new requirements imposed on security-based swaps under the Dodd-Frank legislation.


According to the SEC, the guidance issued today makes clear that substantially all of Title VII’s requirements applicable to security-based swaps will not go into effect on July 16, the effective date of Title VII under the Dodd-Frank Wall Street Reform and Consumer Protection Act.  The Commission’s action also grants temporary relief from compliance with most of the new Exchange Act requirements that would otherwise apply on July 16. 

In addition, to enhance the legal certainty provided to market participants, the SEC said that its action provides temporary relief from Section 29(b), which generally provides that contracts made in violation of any provision of the Exchange Act shall be void as to the rights of any person who is in violation of the provision. 

“This is the first step in a series of actions the SEC intends to take in coming days to address effective date issues,” said Robert Cook, Director of the SEC’s Division of Trading and Markets. “Temporarily and to the extent appropriate, our goal is to preserve the pre-Dodd-Frank Act legal framework until we complete the rulemaking tasks and develop a workable implementation plan.” 

The antifraud and anti-manipulation prohibitions of the federal securities laws will continue to apply to security-based swaps after July 16.

Title VII is the portion of the Dodd-Frank Act that establishes a comprehensive framework for regulating over-the-counter derivatives. In particular, according to the SEC, it authorizes the Commission to regulate “security-based swaps” while also authorizing the CFTC to regulate other swaps. The portion of Title VII referred to as Subtitle B, which addresses the new regulatory regime for security-based swaps, generally will take effect on July 16 (360 days after the date of the Dodd-Frank Act’s enactment).

After proposing all of the key rules under Title VII, the SEC said it intends to consider seeking public comment on a detailed implementation plan that will permit a rollout of the new securities-based swap requirements in an efficient manner while minimizing unnecessary disruption and costs to the markets.

Although the guidance and temporary relief are now in effect, the Commission is seeking input from the public on today’s actions. Public comments should be received by July 6, 2011.

More information is available at