Completing the remaining Dodd-Frank Act mandates, including the remaining security-based swap rules required by Title VII, is a priority for the Commission in 2016, according to SEC Chair Mary Jo White. Next up will finalizing the substantive requirements for security-based swap dealers, especially the rules governing their business conduct and the requirements for their capital, margin, and asset segregation, she noted.
In her remarks to open PLI’s annual SEC Speaks conference, White provided a glimpse of what is on the rulemaking calendar in 2016, but also discussed the growing importance of the SEC’s responsibilities outside of managing the public company disclosure regime. Duties such as setting financial standards for broker-dealers, reviewing rule filings by exchanges and other SROs, supervising the clearing of securities, and overseeing the PCAOB have become critical to the agency’s mission as market complexity has increased, she said.
Beyond disclosure. While not retreating from its core disclosure powers, White said that the Commission is increasingly considering using other measures to fulfill its mission. As examples, she cited Regulation SCI, which imposes requirements for systems controls and technology standards, and the money market fund reforms coming in October that go beyond enhancing disclosure and require prime funds to float their net asset value after years of a fixed net asset value.
A number of the SEC’s outstanding proposals reflect the Commission’s consideration of tools beyond disclosure, White added. Aspects of the asset management proposals would impose minimum liquidity requirements and limits on derivatives in addition to more standardized disclosures, she noted. In addition, the proposal for alternative trading systems requires greater investor disclosure, but also provides the agency with better tools to supervise changes in their operation. Disclosure is just one tool among many that the SEC needs to oversee today’s markets, she said.
More 2016 priorities. In addition to finishing the swaps rules, in 2016 the Commission will look to shorten the settlement cycle from T+3 to T+2, and will try to enhance filings through the expanded use of structured data, according to White. The SEC also will attempt to finalize rules updating the intrastate offering exemption and will consider recommendations for a universal proxy. Considering final rules for resource extraction is also on the agenda, she said.
White indicated that the Commission’s enforcement efforts will focus on financial reporting, market structure, and the structuring, disclosure, and sales of complex financial instruments. For her part, in 2016 White will continue to work to develop support for a uniform fiduciary duty for investment advisers and broker-dealers, she noted, and to bring forward a workable program for third party reviews to enhance the compliance of registered investment advisers.
Discretionary rulemaking. The agency’s work this year will include its usual discretionary rulemaking, particularly with respect to the asset management industry, the structure of the equity markets, and the disclosure regime, she said. Priorities in the asset management industry include finalizing rules to enhance reporting for investment advisers and mutual funds, to promote stronger and more effective liquidity risk management across open-end funds, and to require funds to monitor and manage derivatives-related risks and provide limits on their use. White added that the Commission plans to advance proposals for transition planning and stress testing in the asset management industry this year.
With regard to equity market structure, White that the Commission hopes to finalize its proposed rules to broaden the oversight of active proprietary traders, including high-frequency traders, and rules to update to the regulation of alternative trading systems. The SEC also will look to advance new proposals with enhancements to order routing disclosures and to the risk controls on trading algorithms, she said.
White expects the SEC to further its work on new rules for transfer agents and to evaluate SROs’ plans to improve volatility safeguards, including the operation of the limit up-limit down plan under various market conditions. She also believes the SEC will soon publish for comment the SROs’ plan for a consolidated audit trail.
Finally, White said that the staff’s disclosure effectiveness project will continue in 2016, including proposals addressing issues under Regulation S-K. This work will complement and further implement the mandates the Commission received last year under the FAST Act to simplify and modernize the disclosure requirements for public companies, she concluded.
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