Washington, D.C.  –   Stephen Hall, Legal Director and Securities Specialist for Better Markets, issued the following statement on the filing of two comment letters to the SEC on proposals to allow compliance with foreign requirements to satisfy U.S. law:

“The SEC has failed to satisfy the legal test for allowing overseas requirements to substitute for our laws and rules when it comes to dealers in the complex and high-risk derivatives markets for security-based swaps.

 “Regulators in the UK and France are asking the SEC to determine that derivatives dealers based in those countries should be allowed to participate in our derivatives markets without complying with our laws. Under the Dodd-Frank Act, the SEC can grant that request but only if it finds that the foreign laws applicable to those dealers are ‘comparable’ to U.S. requirements and can adequately protect the stability of the U.S. financial system. The requests cover a wide range of important regulatory requirements, including those relating to risk controls, capital and margin, and internal supervision and compliance.

“The SEC proposals make clear on their face that certain aspects of the UK and French laws and rules are not comparable, since, for example, the SEC has deemed it necessary to add a long list of tailor-made ‘conditions’ to compensate for the acknowledged gaps in the laws of those countries with respect to capital requirements. Moreover, the SEC is proposing to rely on mere guidance from overseas authorities, even though it isn’t even clearly binding or permanent.

“But above all, as we emphasize in our comment letters, if the SEC is nevertheless inclined to grant the requests for substituted compliance orders, it must at a minimum ensure that the conditions set forth in both proposals are applied with full force and without exception or dilution. The industry is trying to pare them back, and the SEC must at least stand firm if it decides to grant the substituted compliance orders.”

###

Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies – including many in finance – to promote pro-market, pro-business, and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements, and more. To learn more, visit www.bettermarkets.com.