SEC's business conduct standards for swap entities

May 2016

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Last month, the Securities and Exchange Commission (SEC) finalized business conduct standards for security-based swap dealers. The completion of this rule by the SEC is significant because few security-based swap rules have been finalized, as compared to the numerous rules completed by the Commodity Futures Trading Commission (CFTC) that govern other types of swaps. These business conduct standards represent the first of four rulemakings that must be finalized before security-based swap dealers will have to register with the SEC.

  1. SBSDs already subject to the CFTC’s requirements can leverage existing compliance frameworks.
  2. The Chief Compliance Officer requirement looks familiar.
  3. SBSDs and other swap dealers will not be considered fiduciaries of employee benefit plans.
  4. The SEC requires SBSDs to explicitly determine that smaller counterparties are suitable trading partners.
  5. Rule divergence from the CFTC does not necessarily imply considerable extra work for SBSDs.
  6. Additional disclosures for uncleared SBS.
  7. The SEC continues its rule-by-rule approach to cross-border for non-US SBSDs.
  8. Foreign branches of US SBSDs will have to be cautious with respect to their transactions with non-US counterparties.
  9. The SEC is not making substituted compliance determinations pertaining to business conduct standards.
  10. The SBSD registration date is likely closer than originally anticipated.

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Dan Ryan
Banking and Capital Markets Leader, PwC US
Tel: +1 (646) 471 8488

Alison Gilmore
Asset and Wealth Management Marketing Leader, PwC US
Tel: +1 (646) 471 0588

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