Registration Process for Security-Based Swap Entities: SEC Proposes Rules on Registration of Security-Based Swap Dealers and Major Security-Based Swap Participants

Sullivan & Cromwell LLP - October 18, 2011

On October 12, 2011, the SEC proposed rules on registration with the SEC of security-based swap dealers (“SBS Dealers”) and major security-based swap participants (“Major SBS Participants” and together with SBS Dealers, “SBS Entities”), as required by Section 764 of the Dodd-Frank Act. Under the proposed rules, in order to register, an SBS Entity must file the following with the SEC:

  • A completed application form including information about its business, management and ownership;
  • A certification from a senior officer certifying that the applicant has the operational, financial, and compliance capabilities to act as an SBS Entity; and
  • A certification to the effect that none of the personnel involved with the SBS Entity’s security-based swap business is statutorily disqualified.

The proposed rules provide for three different forms of registration applications depending upon the regulatory status of the applicant:

  • Form SBSE, which is based on Form BD, for unregulated entities;
  • Form SBSE-A for applicants registered with the CFTC as a swap dealer or major swap participant; and
  • Form SBSE-BD for applicants registered with the SEC as broker-dealers.

The proposed rules anticipate that SBS Entities will “conditionally” register prior to the effectiveness of the full suite of security-based swap rules. Registration applications would be considered complete upon the filing of a senior officer certification prior to the effective date of the rules governing SBS Entities, and on-going registration would become effective once registration is granted by the SEC.

The SEC requested comments on all aspects of the proposed rules. Comments are due December 19, 2011.