In an early sign of the priorities of the new administration, the SEC recently announced a new Cross-Border Task Force within the Division of Enforcement. According to its press release, the initiative is designed to sharpen the agency’s focus on foreign-based companies and market participants whose activities may harm U.S. investors, particularly through market manipulation schemes on US exchanges or otherwise.
Cross-Border
The SEC’s Security-Based Swap “Substituted Compliance” Regime
Foreign security-based swap dealers (SBSDs) and major security-based swap participants (SBSPs) may satisfy specified U.S. rules by complying with comparable home-country requirements—but only if the SEC has issued an order expressly allowing it. But substituted compliance does not mean free pass.
Because many conditions are cross-referenced (e.g., capital, recordkeeping, and reporting), a single breach of a substituted foreign requirement can simultaneously violate multiple Exchange Act provisions—and instantly revoke the ability to rely on substituted compliance.