Speech by SEC Commissioner:
Effective Antifraud Rules Must Address Cross-Market Activity
Commissioner Luis A. Aguilar
U.S. Securities and Exchange Commission
SEC Open Meeting
November 3, 2010
The Dodd-Frank Act has given the Commission broad authority to oversee the market for security-based swaps, which has operated without adequate regulation or transparency. One important aspect of the Commission's new regulatory powers is enhanced authority to prohibit misconduct with respect to security-based swaps.
The antifraud rule we propose today is intended to address the unique nature of security-based swaps — in particular, the potential for fraud and manipulation both within markets and across markets. The rule would address not only fraud or manipulation with respect to security-based swaps, but also fraudulent or manipulative conduct regarding an underlying reference security that affects the value of a security-based swap.1
This would be the Commission's first antifraud rule specifically addressing security-based swaps, and I am particularly interested in comment on the following two issues.
First, as the release asks, is there potential fraudulent conduct that the rule does not capture? And if so, how we should modify the rule to address this?
And, second, is the rule sufficiently flexible that it will continue to be effective as the market for security-based swaps evolves?
Finally, I join my colleagues in thanking the staff across the agency for their work on this proposal.