WASHINGTON -- Securities industry officials and the SEC hope to be able to agree on some voluntary standards for the derivatives affiliates of securities firms in September or October, market participants said yesterday.
Securities and Exchange Commission chairman Arthur Levitt Jr. wants to be able to report to Congress on the voluntary standards before the end of the legislative session, they said.
Both Levitt and securities firm officials are trying to prevent Congress from enacting legislation that would require the SEC to regulate the derivatives affiliates of securities firms and insurance companies. The SEC has little or no regulatory authority over these affiliates
The SEC's oversight of the derivatives affiliates of securities firms is limited to collecting information from them on a quarterly basis. The commission has no authority over insurance companies, which typically are regulated by state commissions.
SEC officials have opposed several pending derivatives bills that would extend their regulatory authority to the derivatives affiliates. They have insisted at congressional hearings that they already have the tools they need to regulate derivatives.
The SEC recently gave the Securities Industry Association the green light to try to come up with derivatives standards that affiliates of securities firms could voluntarily comply with.
"The SEC has raised a number of issues that they are interested in and would like us to address" in developing voluntary capital, disclosure, and sales practice standards, an association official said yesterday.
The association's swap and overthe-counter derivative products committee has set up three subcommittees to try to deal with these issues and devise voluntary standards by the fall, the official said.
"We're trying to get an industry consensus on the various topics that the SEC has expressed an interest in," he said. "And then we'll get back to them and say this is what we proposed to do with respect to these issues."
One of the panels has been charged with risk assessment issues and is trying to come up with a list of qualitative information that would give the SEC a risk profile of the derivatives activities of securities firms and their affiliates, the official said.
Another group has been asked to analyze a grid that the SEC staff has developed to help assess risks and set capital standards for derivatives. The group is supposed to compare the SEC grid with the models that firms use to analyze their derivatives risks and capital needs.
The third subcommittee is looking at sales practice standards and whether some type of uniform format can be developed for providing information about derivatives products to customers, he said.
