A number of trade groups and industry commenters, including the Institute of International Bankers, ISDA and SIFMA; the Bank Policy Institute; the SIFMA Asset Management Group; the American Council of Life Insurers; the Committee on Capital Markets Regulation; and the Alternative Investment Management Association (collectively, the trade groups), reiterated their opposition to the US Securities and Exchange Commission’s (SEC) proposal (Rule 10B-1) to require reporting of large positions in security-based swaps (SBSs).
In supplemental comment letters, the trade groups argued that:
- the additional economic analysis provided by the SEC staff does not adequately address previously raised concerns about the original proposal;
- there is risk of harm in that public disclosure could enable reverse engineering and front-running of others’ positions;
- operational burdens and expenses associated with the rulemaking have not been adequately addressed;
- the cross-border scope is too broad;
- positions should not be reported at the adviser level;
- the distinction between reporting thresholds for SBS and other equity securities is not justified; and
- the proposal is not supported by the language of Exchange Act Section 10B (“Position limits and position accountability for security-based swaps and large trader reporting”).
A number of the trade groups urged the SEC to allow for a substantial implementation period should new Rule 10B-1 be adopted in order to, among other things, adjust and adopt technological systems and practices.
Nihal Patel, partner at law firm Fried, Frank, Harris, Shriver & Jacobson, writes in a blog post: “The comment file on this proposal is massive, largely consisting of natural persons supporting the proposal. There is a sense that opposition to the rule as proposed is opposition to transparency in general (or puppies and babies) and that the relevant products are being used for nefarious purposes.
“However, as many of the trade group letters note, the SEC is not writing on a blank slate. There is a vast amount of existing regulatory and public requirements associated with equities and swaps, much of which (particularly with respect to swaps) has yet to be meaningfully digested or interpreted by the SEC. Simply adding “more” is not necessarily better – or useful – at this time. The SEC’s proposed approach has not been chosen with an incrementalist mentality of building on what is in place in order to limit costs or to address known and unknown consequences of an entirely new system.”