SEC Proposes Business Conduct Standards for Security-Based Swap Dealers and Major Security-Based Swap Participants

The SEC 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 are mandated by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which authorizes the SEC to implement a comprehensive framework for regulating the over-the-counter swaps markets.

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.  Additional requirements would be imposed for dealings with special entities, which include municipalities, pension plans, endowments and similar entities.

The SEC deadline for public comments on the proposal is August 29, 2011.

Click here to access the release.

Click here to access the proposed rule.