SEC Proposes Rule Prohibiting Fraud, Manipulation and Deception in Connection with Security-Based Swaps


On November 3, the Securities and Exchange Commission proposed a new rule under the Securities Exchange Act of 1934 (Exchange Act) that is intended to prevent fraud, manipulation and deception in connection with the offer, purchase or sale of any security-based swap, the exercise of any right or performance of any obligations under a security based-swap, or the avoidance of such exercise or performance.

Section 761(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act defines a “security-based swap” as “any agreement, contract, or transaction that is a swap, as defined in Section 1(a) of the Commodity Exchange Act, that is based on a narrow-based security index, or a single security or loan, or any interest therein or on the value thereof, or the occurrence or non-occurrence of an event relating to a single issuer of a security or the issuers of securities in a narrow-based security index, provided that such event directly affects the financial statement, financial condition or financial obligations of the issuer.”

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