The SEC is likely charged with writing the most rules for financial reform; they want to hear from you.
Tasked with writing probably the most rules for FinReg, the Securities and Exchange Commission has opened up a new channel for stakeholders to make themselves heard. So far, other regulators involved in the rule-making, such as the Commodities Futures Trading Commission, have not changed their public comments mechanism, although a spokesman said it may “tweak things” once the rule-making gets into full swing.
According to an SEC press release, with its new process, the public will be able to comment before the agency proposes its regulatory reform rules and amendments. This compares with the previous policy of taking comments after the rules have been proposed. The SEC adds that the new process “goes well beyond what is legally required and will provide expanded opportunity for public comment and greater transparency and accountability.” To make a comment, go here.
However there’s a rub: as part of the new process, the SEC “will provide greater public disclosure of meetings with SEC staff.” For its part, the CFTC, which will also write a large chunk of the rules, will also publish all comments, “without review and without removal of personally identifying information.” This means that for treasurers who want to be heard, the new process forces them to have courage of their convictions.
The SEC is also taking a more proactive approach to seeking comment. According to the SEC press release, “Staff will try to meet with any interested parties seeking a meeting.” It goes on to state that it will also “reach out as necessary to solicit views from affected stakeholders who do not appear to be fully represented by the developing public record on a particular issue.” This is a big change from sitting back and waiting for comment as was previously the case.
Working together
Dodd-Frank has significantly increased the mandates of the SEC and CFTC in terms of what they will now enforce: their reach is broader, and the causes of action they can bring have also increased significantly. As has been the case previously, the two agencies will work together closely, particularly as it relates to derivatives.
Both the SEC and CFTC have already started their joint rule-making process, particularly relating to the definition of key terms such as those of a wide range of swaps, as well as working on mandatory clearing of security-based swaps, end-user exception and security-based swap clearing agencies. Other rules they will work on jointly include:
- Mixed swaps
- CFTC-exempted agreements, contracts and transactions
- SEC-exempted accounts, agreements and transactions involving a put, call or other option on one or more securities
- Consistent and comparable regulations
- Similar treatment for functionally or economically similar products or entities
Whether this creates chaos or not remains to be seen. For now, corporates and others, including regulated entities, and hedge funds, as well as their officers, directors, and employees, “should brace themselves and prepare for a significant increase in enforcement activity by both the SEC and the CFTC,” wrote Covington & Burling LLP in a letter to clients.