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March 22, 2022

Better Markets Urges SEC to Adopt Strong Anti-Fraud Rules, Without Loopholes, for Security-Based Swaps that Contributed to the Crisis

WASHINGTON, D.C.—Legal Director and Securities Specialist Stephen Hall issued the following statement on the filing of Better Markets’ comment letter to the Securities and Exchange Commission in response to the agency’s proposed anti-fraud and anti-manipulation rules for security-based swaps:

“Fraud, manipulation, excessive risk-taking, and a lack of meaningful transparency surrounding security-based swaps were among the most important contributors to the financial crisis.  Today’s proposal will give the SEC some important new tools for combating these problems, and they’ll complement the reforms already in place governing these complex and potentially dangerous derivatives markets.  It’s important, however, that the SEC reconsider the safe harbor, an unnecessary industry accommodation that actually threatens to insulate illegal activity from SEC enforcement.

“The proposed rule would prohibit fraud and manipulation in the exercise of the ongoing rights and obligations that are unique characteristics of security-based swaps—an important adjunct to the general anti-fraud protections in the securities laws.  It would also require public reporting of large security-based swap positions, which would reduce the likelihood and severity of events like the Archegos fiasco, which cost some banks billions of dollars and caused severe, unexpected drops in the share prices of several companies.  And the proposal would specifically prohibit coercion of chief compliance officers.  This is a critically important measure for ensuring the independence of these compliance guardians, one that Better Markets has been urging the SEC to adopt since 2011.  All of these reforms are worthwhile.

“Unfortunately, the SEC is also poised to take a step backward.  The SEC is proposing to include a safe harbor, prompted by industry concerns that the anti-fraud and anti-manipulation rules could cover the innocent exercise of non-volitional rights or obligations under a security-based swap following the acquisition of material non-public information.  However, as we pointed out in our comment letter, these concerns are unfounded and the safe harbor is unnecessary.  Worse, this provision is likely to insulate culpable acts of fraud carried out through the use of material non-public information.   Another safe harbor, governing trading by corporate insiders, is apparently being used to legitimize what is in effect illegal conduct. The SEC should take heed and delete the safe harbor from this otherwise strong proposal.”

Read our full comment letter here.


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

Contact: Evelyn Swan at 202-618-6433 or

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