CCH Financial Reform News Center

House Ag Chair Peterson Details SEC, CFTC and FERC Jurisdiction over Derivatives in Dodd-Frank Act

By James Hamilton, J.D., LL.M., Principal Analyst, CCH Federal Securities Law Reporter; and CCH Derivatives Regulation Law Reporter.

In the view of House Agriculture Committee Chair Collin Peterson, the Dodd-Frank Act allocates authority over swaps and security-based swaps as follows. First, the CFTC has exclusive jurisdiction over swaps, including swaps on broad-based security indexes. Within the swap definition is a category of swaps called security-based swap agreements. For this specific category of swaps, the CFTC will continue to exercise its full jurisdictional authority, while the SEC may exercise certain specific authorities over these products. Title VII also clarifies that the SEC has jurisdiction over security-based swaps, which are swaps on narrow-based security indexes and single securities, and that the two agencies share authority over mixed swaps.

Walter Suggests Improvement to OTC Derivatives and Hedge Fund Adviser Pieces of Reform Legislation

This story appeared in SEC Today.

The financial regulatory reform bills pending in Congress will bring much needed change to financial regulation, according to SEC Commissioner Elisse Walter, but she believes that the legislation could be strengthened in some areas.  She spoke at the annual SEC Regulation Outside the United States conference in London, and her remarks are available on the SEC’s Web site.

Senate Conferees Defend Payment, Clearance and Settlement Provisions of Financial Reform Legislation

This story appeared in Jim Hamilton's World of Securities Regulation.

The Chair of the Senate Banking Committee, Senator Chris Dodd, and his Ranking Member Senator Richard Shelby strongly defended Title VIII of the financial reform legislation at the June 17, 2010 meeting of the House-Senate conference reconciling the House-Semate bills. With the vast new duties on clearinghouses, particualrly in the derivatives area, a robust payment, clearing and settlement system is critical. The House had proposed to strike Title VIII from the bill.

Senator Dodd said that Title VIII preserves the role of the front line regulators like the SEC and CFTC. But it also requires robust prudential standards for entities designated by the Financial Stability Oversight Council as systemically important.

Congress Heeds G-20 Call for Int'l Consensus in Derivatives Regulation

This story appeared in Jim Hamilton's World of Securities Regulation.

The G-20, including the United States, has endorsed efforts to coordinate international financial policy and regulations as nations reform their financial regulatory systems. A focus on reaching international consensus is important as legislation moves forward.

Grassley-McCaskill Amendment Enhances SEC, CFTC Inspector Generals, Sets Up Council of Inspector Generals

This story appeared in Jim Hamilton's World of Securities Regulation.

The Senate approved an amendment to the financial reform legislation creating a council of federal financial agency inspector generals, including the IGs at the SEC, CFTC, FDIC and the Fed. The council will meet quarterly and compare notes and talk about their investigations in order to ensure that they are not duplicating each other’s work. They will also discuss collective approaches to systemic risk. The council must also submit an annual report to Congress recommending improvements to financial oversight. Section 989E.

SEC, CFTC Have Few Answers in Preliminary Report on Market Upheaval

By James Hamilton, J.D., LL.M., Principal Analyst, CCH Federal Securities Law Reporter; and CCH Derivatives Regulation Law Reporter.

The SEC and CFTC staffs may have concluded what did NOT cause the dramatic market turmoil on May 6, but their preliminary report offers few answers as to what did cause the upheaval. According to the report, the staff review is in its preliminary stages and is ongoing.

Initially, the staffers indicated that they had found no evidence that these events were triggered by “fat finger” errors, computer hacking, or terrorist activity, although they could not completely rule out these possibilities. While not identifying any particular cause, the report focuses on six major themes:

CCH White Paper Offers Closer Look at HR 4173

CCH Principal Analyst James Hamilton, J.D., LL.M., has authored a 40-page white paper titled, "House Passes Historic Securities, Derivatives and Systemic Risk Reforms: HR 4173." The paper offers a detailed look at the securities, derivatives, corporate governance, systemic risk and dissolution authority components of the legislation.

Download the white paper

Peterson-Frank Remarks: Securities and Derivatives Exchanges Not Subject to Systemic Risk Regulation

This story appeared in Jim Hamilton's World of Securities Regulation.

Title I of the House Wall Street Reform and Consumer Protection Act, HR 4173, creates a systemic risk oversight and regulatory structure that enables regulators to raise capital requirements and impose heightened prudential standards on large, interconnected firms that could pose a threat to financial stability. The legislation also empowers the Federal Reserve Board to impose a host of additional requirements on institutions and activities deemed systemically important.

House Legislation Hedging Exemption Subject to Floor Amendments

This story appeared in Jim Hamilton's World of Securities Regulation.

The House reform legislation would require over-the-counter derivatives trading to be conducted through clearinghouses, which are set up to police derivatives trading. Under HR 4173, if a clearing mandate applies to a swap or class of swaps, then the swap dealers and major swap participants not only have to clear such trades but also have to execute them on or through a futures or securities exchange or a swap execution facility. This provision provides greater price transparency and will narrow spreads, all to the benefit of the end user. For the end users, the bill provide an exemption from the clearing mandate and, consequently, from the execution mandate. The House defeated an amendment that would have imposed an execution mandate on end users.

CCH Briefing Paper Examines House Legislation

The CCH Editorial Staff of banking and securities law analysts has authored a detailed overview titled, "House Passes Wall Street Reform Act." From the introduction:

On December 11, 2009, the U.S. House of Representatives passed legislation to restructure the financial services regulatory system, the Wall Street Reform and Consumer Protection Act of 2009 (HR 4173), by a vote of 223-202. As discussed below, the sweeping array of reforms includes the Financial Stability Improvement Act, which would create a systemic risk regulator, strengthen regulation of depository institutions and bank holding companies, improve the asset-backed securitization process, and provide for an enhanced dissolution authority. The legislation also would create a Consumer Financial Protection Agency, reform the over-the-counter derivatives market, subject hedge funds to stricter scrutiny, impose new corporate governance mandates, adopt heightened requirements for credit rating agencies and expand regulatory enforcement powers. Among other measures, the legislation features expansive consumer mortgage protections and creates a Federal Insurance Office.

Download the briefing paper