The Securities and Exchange Commission announced the adoption of new rules aimed at preventing fraud in connection with security-based swap transactions.
The SEC defines a security-based swap as an agreement, contract, or transaction in which two parties agree to the exchange of payments or cash flows based upon the value of other assets or upon the occurrence or non-occurrence of some event.
One antifraud and anti-manipulation rule that was adopted by the SEC is designed to prevent misconduct in connection with effecting any transaction in, purchasing, selling, or inducing or attempting to induce the purchase or sale of, any security-based swap. The rule identifies illegal activities that can occur in these swaps, including employing any device, scheme, or artifice to defraud or manipulate, obtaining money or property by means of any untrue statement of a material fact or any omission of a material fact, and engaging in any act that would operate as a fraud or deceit.
Another rule is aimed at preventing undue influence over the chief compliance officer of security-based swap dealers and major security-based swap participants. The measure prohibits any officer, director, supervised person, or employee of a security-based swap entity to take any action to coerce, manipulate, mislead, or fraudulently influence the CCO of the entity.
“Any misconduct in the security-based swaps market not only harms direct counterparties but also can affect reference entities and investors in those reference entities,” said SEC Chair Gary Gensler. “Given these markets’ size, scale, and importance, it is critical that the Commission protect investors and market integrity through helping prevent fraud, manipulation, and deception relating to security-based swaps. Today’s set of rules will do just that.”
The adopting release setting forth the rules will be published in the Federal Register, and the final rules will become effective 60 days after the date of the publication.
The attorneys at Lewitas Hyman include former senior attorneys at the SEC whose legal experience and industry knowledge make them uniquely qualified to provide counsel on securities regulatory, compliance and enforcement matters. When it comes to regulatory compliance and enforcement matters, our attorneys have dealt with a wide range of investigations and enforcement actions. If your firm is facing an investigation from a regulatory agency, please contact Lewitas Hyman at (888) 655-6002 or through our online contact form.
