* SEC's Walter lays out top agenda items
* Says cross-border swaps rule is "critical linchpin"
* Agency also actively looking at general advertising rule
* SEC still working on risk control rules to target errors
By Sarah N. Lynch
WASHINGTON, Jan 18 The new head of the U.S.
Securities and Exchange Commission unveiled some of her top
agenda items on Friday, saying the agency will focus on how to
apply new swaps rules overseas, capital-raising reforms and
market structure changes.
Elisse Walter, who took over the agency in December, said a
forthcoming cross-border swaps proposal is "a critical linchpin"
as the SEC finalizes derivatives rules required under the 2010
Dodd-Frank law enacting Wall Street reforms.
"That is what is first on the agenda and really stands as
the most important thing we need to do as a prelude to adopting
everything else," Walter said before the SEC's Investor Advisory
Committee, a panel of outside advisers.
Dodd-Frank gave the SEC and the U.S. Commodity Futures
Trading Commission (CFTC) authority for the first time to
regulate the opaque $640 trillion over-the-counter derivatives
market, which was a destabilizing force during the financial
New rules will require firms that deal in swaps such as
Goldman Sachs Group Inc and Morgan Stanley to
register with regulators.
To reduce systemic risks, many products will need to be
routed through clearinghouses that guarantee trades, and some
must be executed on regulated trading platforms for price
Global regulators are committed to similar rules but have
not figured out how to apply the rules in each country to
The CFTC, which will oversee the bulk of the derivatives
market, has proposed a blunt approach subjecting foreign banks
to the same rules as the U.S. market if they wish to do business
with U.S. firms and if they exceed $8 billion in swaps trading a
The CFTC has been criticized because its staff issued a plan
in the form of guidance instead of a more formalized and
demanding rule-making process.
The SEC has been praised by lawmakers and others because it
is coming up with a formal rulemaking proposal that will include
an economic analysis of how a cross-border application of new
rules would impact the industry.
Both U.S. and foreign regulators have been in talks over how
to reach agreement on this issue.
JOBS ACT ALSO PRIORITY
Walter also plans to prioritize rule-making required under
the 2012 Jumpstart our Business Startups (JOBS) Act. The law
aims to help small businesses raise capital by loosening
The SEC is currently drafting a rule included in the law
that would lift a longtime ban on general advertising for
Lifting the ban would make it easier for hedge funds to
reach potential investors for private offerings.
But investor advocates, including members of the SEC's
Investor Advisory Committee, have criticized the proposal,
saying it fails to include safeguards to prevent fraud.
The SEC is currently divided between two Democrats and two
Republicans. Both Republicans support going ahead with the
proposal as written, while Democratic Commissioner Luis Aguilar
wants it scrapped unless more investor protections are added.
Walter, also a Democrat, said Friday the SEC is "looking
very hard" at how to move forward.
She has raised concerns over the lack of investor protection
but did not tip her hand about how a final rule would look.
She emphasized the agency must act because of Congress'
mandate. But she added that "nothing will come out of this
building unless it has the votes" from a majority of
Despite a heavy load the SEC faces in finalizing Dodd-Frank
and JOBS Act reforms, Walter said market structure rules remain
of critical importance.
Exchanges, brokerages and the SEC have been trying to come
up with new regulations to help prevent technology glitches from
wreaking havoc after some high-profile glitches in 2012 that
shook markets. They included Nasdaq's botched handling
of the Facebook initial public offering and Knight
Capital's $440 million in losses due to a software
One idea that has been discussed is the development of a
"kill switch" that can be used to shut down trading before an
error gets out of hand. Last month, an executive at the New York
Stock Exchange said exchanges were hoping to unveil a
kill switch framework in the first quarter of this year.
"Very, very high on our agenda is doing a set of rules to
move forward on a mandatory basis with the kinds of controls
that the marketplaces have to have in place in order to try to
prevent errors," Walter said.