SEC mulls Wall Street ‘conflicts’ rule, a decade after 1st try

SEC mulls Wall Street ‘conflicts’ rule, a decade after 1st try

SEC mulls Wall Street ‘conflicts’ rule, a decade after 1st try By Reuters

Breaking News


Stock Markets 9 minutes ago (Jan 25, 2023 10:06AM ET)

(C) Reuters. FILE PHOTO: People exit the headquarters of the U.S. Securities and Exchange Commission (SEC) in Washington, D.C., U.S., May 12, 2021. Picture taken May 12, 2021. REUTERS/Andrew Kelly/File Photo

(Reuters) – Wall Street’s top regulator on Wednesday was set to unveil a rule barring traders in asset-backed securities from betting against the very assets they sold to investors, behavior that became infamous in the wake of the 2008 global financial crisis.

In Washington, the U.S. Securities and Exchange Commission’s five members were due to vote on whether to propose the rule formally at a meeting set to begin at 10 a.m. EST.

The rule is among the last yet to be adopted under the landmark Dodd Frank Wall Street reform legislation of 2010 that sought to address the root causes of the mortgage crisis, SEC officials said.

The sweeping reforms, named for sponsors Senator Chris Dodd of Connecticut and Representative Barney Frank of Massachusetts, aimed to protect investors and taxpayers by preventing the buildup of risk and liability in the financial system. Among other things, the legislation contained financial stability measures governing banks deemed “too big to fail” and created the Consumer Financial Protection Bureau.

An earlier version of the conflicts rule first proposed in 2011 was never finalized.

In the ensuing years, Democratic lawmakers complained that the SEC had failed to meet a 270-day deadline to issue a rule implementing Dodd Frank’s Section 621. When made effective with an SEC rule, the section would prohibit traders from betting against asset-backed securities they sold to investors.

According to SEC officials, the rule would ban such actions for up to a year following sale of the securities.

In prepared remarks released ahead of the vote, SEC Chairman Gary Gensler said the rule would provide exceptions for legitimate activities, such as hedging to mitigate risk, marketmaking and liquidity commitments.

“Through these congressionally mandated exceptions, the rule would allow these market activities while targeting the conflicts that Congress identified,” Gensler said, adding that the latest version of the rule had been refined in light of feedback from the public.

According to SEC officials, traders who disclosed bets contrary to clients’ investments would still run afoul of the rule.

Without citing prominent recent examples of such conflicts of interest in the asset-backed securities market, SEC officials said the conflicts rule was needed to remove the opportunity and incentive for such conduct.

SEC mulls Wall Street ‘conflicts’ rule, a decade after 1st try

Our Apps

Terms And Conditions
Privacy Policy
Risk Warning

(C) 2007-2023 Fusion Media Limited. All Rights Reserved.

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.