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On June 11, 2012, the SEC proposed its policy on the sequencing of compliance dates for the rules adopted under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”) relating to security-based swaps. While the statement does not provide specific compliance dates or a conclusive sequencing of compliance dates, the statement indicates the following initial priorities:

• first, the rules governing the clearing process (other than mandatory clearing and the end-user exception);
• second, the rules defining the terms “security-based swap”, “security-based swap agreement”, “mixed swap”, “security-based swap dealer”, “major security-based swap participant” and “eligible contract participant” (the “Definitional Rules”) and the rules concerning the treatment of cross-border security-based swap transactions and non-U.S. persons engaging in security-based swap activities (the “Cross-Border Rules”); and
• third, the rules pertaining to the registration and regulation of security-based swap data repositories (“SDRs”), the reporting of security-based swap transaction data to SDRs, and the public dissemination of security-based swap transaction data.

The implementation of the rules relating to:

• mandatory clearing and the end-user exception;
• the registration and regulation of security-based swap dealers (“SBSDs”) and major security-based swap participants (“MSBSPs”); and
• mandatory trade execution of security-based swap transactions and the registration and regulation of security-based swap execution facilities (“SB SEFs”)

would be guided by the following principles:

• prior to mandatory clearing, the SEC should decide whether to propose amendments to the SEC’s rules regarding net capital and customer protection, regarding security-based swap clearing activities in broker-dealers and regarding portfolio margining between cleared security-based swaps and swaps;
• the compliance schedule should take into account the sequencing of the mandatory clearing and mandatory trading requirements established by Dodd-Frank (that is, only security-based swaps subject to mandatory clearing will be required to be traded on an exchange or SB SEF); and
• regulated security-based swaps entities under Dodd-Frank should be given adequate, but not excessive, time to understand and come into compliance with any final rules applicable to them, including phasing in certain relevant regulations.