SIFMA AMG Opposes Certain Requirements of SEC's "Proposed U.S. Personnel Rule" (with Lofchie Comment)

The Asset Management Group of SIFMA ("SIFMA AMG") submitted comments to the SEC concerning its proposed rule on the application of certain Title VII requirements to security-based swap transactions.

In the letter, SIFMA AMG recommended that the SEC not impose Title VII's customer protection requirements on transactions in which neither the dealer nor its counterparty is a U.S. person. SIFMA AMG argued that when asset managers execute security-based swap transactions with non-U.S. dealers on behalf of non-U.S. clients, the non-U.S. clients "do not expect U.S. customer protections to apply, nor are the added burdens justified."

Additionally, SIFMA AMG encouraged the SEC not to require reporting and public dissemination in the U.S. for non-U.S. security-based swap transactions that are arranged, negotiated or executed by a non-U.S. dealer's U.S. personnel. SIFMA AMG argued that the reporting requirements are "duplicative" and undermine the G-20 commitment to improve transparency in the derivatives markets.

Lofchie Comment: With respect to cash-market securities, the SEC has issued relief that permits U.S. advisers acting for non-U.S. persons to interact with non-U.S. dealers in certain circumstances without imposing regulatory requirements on the transactions. It will be interesting to see the extent to which the SEC views its cash market regulations as providing a precedent for the treatment of security-based swap transactions.

See: SIFMA AMG Comment Letter. Related news: SEC Proposes Cross-Border Regulatory Framework for Security-Based Swaps (with Lofchie Comment and Delta Strategy Group Description of SEC Meeting) (April 29, 2015).