WASHINGTON - The unregulated subsidiaries that broker-dealers use to conduct their derivatives business should be regulated, SEC Commissioner Richard Roberts indicated in remarks prepared for a derivatives conference in New York City yesterday.

Roberts said what while the Securities and Exchange Commission has not yet addressed this issue, he believes that "a strong argument can be made" that these subsidiaries may be "operating as unregistered broker-dealers" that should be regulated and made subject to SEC's net capital rule, particularly if the SEC decides to treat interest rate swaps as securities.

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