Securities and Exchange Commission February 2019 – Federal Register Recent Federal Regulation Documents

The Securities and Exchange Commission (``SEC'' or ``Commission'') is proposing rules that would require the application of specific risk mitigation techniques to portfolios of security-based swaps not submitted for clearing. In particular, the proposal would establish requirements for each registered security-based swap dealer (``SBS dealer'') and each registered major security-based swap participant (``major SBS participant'') (each SBS dealer and each major SBS participant hereafter referred to as an ``SBS Entity'' and together referred to as ``SBS Entities'') with respect to, among other things, reconciling outstanding security-based swaps with applicable counterparties on a periodic basis, engaging in certain forms of portfolio compression exercises, as appropriate, and executing written security-based swap trading relationship documentation with each of its counterparties prior to, or contemporaneously with, executing a security-based swap transaction. In addition, the Commission is proposing an interpretation to address the application of the portfolio reconciliation, portfolio compression, and trading relationship documentation requirements to cross-border security-based swap activities and is proposing to amend Rule 3a71-6 to address the potential availability of substituted compliance in connection with those requirements. Moreover, the proposed rules would make corresponding changes to the recordkeeping, reporting, and notification requirements applicable to SBS Entities. Finally, the Commission is requesting comment on how certain aspects of the proposed rules address how a security-based swap data repository (``SDR'') could potentially satisfy its obligation to verify the terms of each security-based swap with both counterparties to the transaction.

The OCC, Board, FDIC, SEC, and CFTC (individually, an Agency, and collectively, the Agencies) are inviting comment on a proposal to amend the regulations implementing the Bank Holding Company Act's (BHC Act) prohibitions and restrictions on proprietary trading and certain interests in, and relationships with, hedge funds and private equity funds in a manner consistent with the statutory amendments made pursuant to certain sections of the Economic Growth, Regulatory Relief, and Consumer Protection Act. The statutory amendments exclude from these restrictions certain firms that have total consolidated assets equal to $10 billion or less and total trading assets and liabilities equal to five percent or less of total consolidated assets and amend the restrictions applicable to the naming of a hedge fund or private equity fund to permit an investment adviser that is a banking entity to share a name with the fund under certain circumstances.