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SEC proposes changes that limit scope of Dodd-Frank’s Title VII

140px-US-SecuritiesAndExchangeCommission-Seal.svgThe SEC voted unanimously on Wednesday to make changes to Title VII of Dodd-Frank—rules governing the extraterritorial reach of Dodd-Frank rules on security-based swap transactions.

The 650-page proposal seeks to narrow the definition of “U.S. person” to include any natural resident, partnership, trust, or corporation. Legal entities with business primarily based in the U.S. and accounts of a U.S. person are also included in the definition, Risk.net reports.

The proposal also allows for substituted compliance in order to ensure the efficiency of the global swaps market by limiting the risk of conflicting or duplicative compliance obligations.

“We should take a robust and workable approach to this particularly complex and predominantly global market,” SEC Chairman Mary Jo White said. “The global nature of this market means that participants may be subject to requirements in multiple countries, and this type of overlapping regulatory oversight could lead to conflicting or costly duplicative regulatory requirements. Market participants need to know which rules to follow, and I believe that this proposal will serve as the road map.”

Additionally, the proposal calls for the required registration of security-based swap clearing agencies, execution facilities and data repositories, and the measure calls for a territorial approach.

Clearing agencies with one or more U.S. members, swap execution facilities that provide U.S. persons or non-U.S. persons with the ability to trade or execute security-based swaps and swap data repositories that receive data from U.S. entities or operate in the U.S. are subject to the new regulatory outlook.

The SEC has published a 90-day comment period on the proposed rules and guidance that will take effect after they are published in the Federal Register.

The commission also voted unanimously to re-open the comment period on all Title VII-related unfinalized rules.

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