SEC Game-Changing Rule: The U.S. Securities and Exchange Commission (SEC) made a decisive move on Monday, implementing a rule inspired by the financial crisis to prevent traders in asset-backed securities from making bets against the same assets they sell to investors.
Mandated by the Dodd Frank law, crafted to eliminate behaviors that contributed to the 2008 global financial crisis, this rule represents one of the final measures to be adopted under the Dodd Frank Wall Street reform legislation of 2010. While an earlier version addressing traders’ “conflicts of interest” was initially proposed in 2011, it faced delays and was never finalized.
The newly adopted rule specifically prohibits “securitization participants,” including underwriters, placement agents, and sponsors for asset-backed securities, from engaging in deals that involve shorting or buying credit-default swaps against those same securities. However, the rule includes exemptions for certain activities such as hedging risk and market-making.
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SEC Chair Gary Gensler emphasized the rule’s significance, stating that it addresses a market that was at the epicenter of the 2008 financial crisis. To accommodate industry concerns, SEC officials noted modifications made to the proposal issued in January, introducing exceptions for affiliates not acting in concert with traders and for investors with “long” positions.
In a 4-1 vote, the SEC approved the rule, with Republican Commissioner Hester Peirce, a vocal critic of the SEC’s rulemaking agenda, casting the dissenting vote. The SEC’s move follows Goldman Sachs’ historic $550 million penalty in 2010 to resolve SEC allegations of misleading investors during the financial crisis, revealing practices where the bank marketed mortgage-backed securities without disclosing significant bets on their devaluation.
The SEC specifies that compliance with the rule will be required for asset-backed securities with closing dates falling 18 months after the rule appears in the Federal Register. This latest measure aligns with ongoing efforts to enhance transparency and address issues that contributed to the financial crisis over a decade ago.
Our Reader’s Queries
What are the new SEC changes for 2024?
In a bold move, the SEC has decided to shake things up for the 2024 season by abandoning its traditional division format. This decision comes with the exciting news that two Big 12 powerhouses, Oklahoma and Texas, will be joining the conference. To ensure fair play, each existing SEC team will face off against either Oklahoma or Texas, but not both. The top two teams in the conference will then battle it out for the coveted conference title on December 7th in Atlanta. This promises to be an exhilarating season for college football fans everywhere.
How will SEC realign with Texas and Oklahoma?
Starting in 2025-26, Texas and Oklahoma will receive their full shares from the SEC as outlined in their “new member” agreements. However, for the 2024-25 season, they will not receive any funds from the SEC’s primary revenue-sharing pool. Despite this, they will still receive compensation from their new conference.
How will SEC be divided in 2024?
Starting in 2024, the SEC will no longer have divisional standings. Instead, the two best teams in the Conference standings at the end of the regular season will compete in the SEC Championship Game. This change was previously announced.
What is the format for the SEC football in 2024?
In the SEC, every team is set to play eight conference football games along with a mandatory opponent from either the ACC, Big Ten, Big 12, Pac 12 or a major independent. Additionally, each team will have two open dates to work with.