MFA Submits Supplemental Comment Letter in Response to the NPRM on the Prohibition Against Fraud, Manipulation, and Deception in Connection with Security-Based Swaps

Managed Funds Association (MFA) submitted supplemental comments to the Securities and Exchange Commission (SEC) on proposed Rule 9j-1 (“Rule 9j-1”) under the Securities Exchange Act of 1934 (the “Exchange Act”). The proposed rule is intended to prevent fraud, manipulation, and deception in the security-based swaps markets. The letter addresses some of the issues that we discussed in our conference call with the Commission Staff on March 2, 2011. It also supplements an earlier comment letter. The letter:

  • Addresses several preliminary points, such as the exceptional importance of properly drafting an anti-fraud rule for the security-based swaps market.
  • Supports the objectives of the proposed rule but shares concern about the harms to the market likely to result from its ambiguities.
  • Discusses an approach to defining the purchase and sale of security-based swaps that is consistent with the authorizing legislation and the way swaps are actually traded on the market in practice.
  • Offers a few thoughts on the cost-benefit analysis of the rule.