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By: Margaret Blake, from law firm Jones Day .
On December 15, 2021, the SEC proposed three rules under the Securities Exchange Act to address misconduct and promote transparency in the security-based swaps markets. The proposed rules would expand the scope of antifraud rules, prohibit certain attempts to influence an SBS dealer's chief compliance officer, and require disclosure of certain large SBS positions. Comments are due 45 days after publication in the Federal Register.
Expanded Antifraud and Anti-Manipulation Rules
While the scheme liability provisions of Rule 10b-5 have been an effective tool for the SEC in policing fraud and manipulation in the securities markets, they have been less effective in the SBS markets and, in particular, the credit default swap market. One reason for this is that certain activities that have concerned regulators in the CDS markets have occurred during the lifecycle of CDS transactions rather than in connection with their "purchase" or "sale."
To address these shortcomings, the SEC has dusted off and revamped Proposed Rule 9j-1, which was originally proposed in 2010 but never acted upon. This rule would prohibit fraud, manipulation, and similar behavior in connection with not only purchases and sales of SBS but also the exercise of any rights or performance of any obligations under SBS. It also would make unlawful the direct or indirect manipulation of the price or valuation of any SBS or a...................... To view our full article Click here
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