January 29, 2022
I am a retail investor. I am also living in or near the Federal poverty line.
The SEC must do its part to regulate the financial markets under its purview. For far too long, large financial institutions have been allowed to rape and pillage the companies and citizens of this country under the guise of providing liquidity and capital formation.
Whether intentional or not, the proposed rules discussed seem to obfuscate their intent in such a way that the general public has difficulty understanding their purpose. Going forward, I propose the formation of a committee to break down and simplify these proposed rules for retail investors. In addition, said committee should allow for a line of communication so retail investors can reach out and clarify the proposed rules.
This would better allow participation by retail investors, especially those of us with limited time who simply want to be included in the regulation of our financial markets.
In reference to S7-32-10, I will answer both in general and break down my response to all bullet points in the Request For Comment'' sections on the proposed rules. My responses will be designated by numbers for each bullet point, where each number responds exclusively to the bullet point that matches it.
Comment for Re-Proposed Rule 9j-1 (P. 56)
In general, I agree with the contents of re-proposed Rule 9j-1. I also believe that all security-based swaps should be migrated to a public blockchain to ensure transparency and reduce the potential for manipulation and fraud.
Specifically addressing the bullet points starting on Page 56:
1. I agree with the rule in general, and specifically agree that the rule should extend to negligent conduct.
1a.Why? Because someone should not be able to evade the laws and rules simply because they didnt know something was illegal - especially where millions, billions, or trillions of dollars are concerned.
2. Security-based swaps should be done exclusively on public blockchains to ensure transparency for all involved parties and prevent or reduce fraudulent or manipulative activity, as well as aiding in preventing the appearance of fraudulent or manipulative activity.
3. I agree in general with the proposed safe harbors re-proposed in Rule 9j-1(f). Unfortunately I do not have the knowledge to comment further on this.
4. Hedging should be defined before this point can be discussed.
5. I agree that re-proposed Rules 9j-1(a)(3) and (4) should not require scienter.
5a. Why? Because if negligence is allowed as a way to bypass the rules, it will encourage the hiring of negligent employees as a loophole.
5b. Further, negligence would not be allowed as an excuse for bypassing the rules in any case which retail investors may participate. Those who are handling monetary sums in the millions or more should not be exempt solely on the basis that they didnt know it was wrong.
6. Re-proposed Rule 9j-1(a) should refer to both actual and attempted conduct.
6a. Why? Because an attempt at illicit conduct is illicit conduct.
7. I agree in general with the application of re-proposed Rule 9j-1(a) to actions to exercise or any action related to performance pursuant to any security-based swap including any payments, deliveries, rights, or obligations or alterations of any rights thereunder or to terminate (other than on its scheduled maturity date) or settle any security-based swap (in addition to, among other things, purchases or sales of, or actions to effect transactions in, security based swaps.
7a. Why? To prevent the exploitation of loopholes within the existing ruleset.
8. I agree in general with the changes to the structure of re-proposed Rule 9j-1(a) to more closely track the language of Section 9(j) of the Exchange act.
8a. Why? This change better delineates the actions that would be subject to the rule as far as I (a layman) can tell.
9. I agree in general with the inclusion of re-proposed Rule 9j-1(b), which makes it unlawful for any person to, directly or indirectly, manipulate or attempt to manipulate the price or valuation of any security-based swap, or any payment or delivery related thereto.
9a. Why? Manipulating the market and intentionally deceiving the opposing side of a trade or swap has the potential to harm not only the investor on the opposing side of the trade, but throughout the market as a whole.
9b. Unfortunately, I do not have the knowledge to comment on specific types of manufactured or opportunistic behavior within the security-based swap market.
10. I agree in general with the inclusion of re-proposed Rule 9j-1(c) that prevents a person from avoiding liability for insider trading through purchasing or selling security-based swaps while in possession of material non-public information with respect to a security or group or index of securities underlying such security-based swap if the person would otherwise have been liable had they purchased or sold the relevant securities.
10a. Why? Insiders should not be allowed to profit from material non-public information prior to said information becoming public.
11. I agree in general with the inclusion of re-proposed Rule 9j-1(d) that prevents a person from avoiding liability and further clarifies scenarios similar to Rule 9j-1(c).
11a. Why? Insiders should not be allowed to profit from material non-public information prior to said information becoming public.
12. I agree in general with proposed Rule 15Fh-4(c).
12a. Why? Because intimidation and manipulation of employees to undertake unlawful actions is a common tactic used throughout the United States, including in the financial industry. By specifically making it unlawful to do so, the commission will be taking a step towards holding those responsible for unlawful actions accountable for their actions.
13. I believe that proposed Rule 15Fh-4(c) should not only apply to officers or directors.
13a. Why? Officers and directors may delegate actions or orders to lower-level employees in such a way to avoid liability. One such example is a director or officer suggesting that an employee undertake such an action that would coerce, manipulate, mislead, or fraudulently influence the chief compliance officer without directly ordering the employee to do so.
14. I believe that proposed Rule 15Fh-4(c) should apply to any person who has access to the chief compliance officer for a security-based swap dealer or security-based swap participant.
14a. Why? Any person who has access to the chief compliance officer of such a dealer or participant may stand to gain from manipulating, coercing, fraudulently influencing, or misleading them. A large network of interconnected parties stand to benefit or be harmed from such an action, through no fault or direct action of their own.
15. I believe proposed Rule 15Fh-4(c) should not be limited to coercion, manipulation, and fraudulently influencing the CCO. Misleading or otherwise deceiving the CCO regarding processes and actions within their purview should likewise be included.
15a. Why? A large network of interconnected parties stand to benefit or be harmed from such a deceptive, coercive, or otherwise manipulative action through no fault or direct action of their own.
16. The commission should seek out further ways that the CCO can be protected in the performance of their duties, as a large network of interconnected parties stand to benefit or be harmed through no fault or direct action of their own if the CCO is compromised.
17. Unfortunately, I do not have the knowledge to know what other officers of an SBS entity might need protection under proposed Rule 15Fh-4(c).
Comment for Proposed Rule 10B-1 (P. 93)
In general, I agree with the contents of Proposed Rule 10B-1. I also believe that all security-based swaps should be migrated to a public blockchain to ensure transparency and reduce the potential for manipulation and fraud.
Specifically addressing the bullet points starting on Page 94:
I believe the commission should utilize its authority in requiring public reporting of both Security-Based swaps and any security or loan or group or index of securities or loans underlying the SBS position, and any other instrument relating to such security or loan or group of index of securities or loans.
Why? Because transparency of such will reduce the potential harm to large networks of interconnected parties that have no influence or knowledge of such.
I agree in general with the requirement that the Schedule 10B be filed promptly, no later than the end of the first business day following the transaction.
I do not have the knowledge of timing required for calculations necessary, but trust the Commissions calculation of such.
Why? Large actors in the financial industry have shown time and time again that they will push for lax disclosure arrangements that allow them to continue actions that harm retail investors and can no longer be trusted to determine such things.
I agree with the scope of the definition in general. If anything, more transparency and stricter guidelines should be used.
Security-Based Swap Position should include all security-based swaps based on the same underlying security or reference entity, regardless of whether they are debt or equity-based.
A Security-Based Swap Position should include all security-based swaps based on the same underlying security or reference entity in addition to similar or related securities or reference entities.
Proposed Rule 10B-1 should require reporting of large positions in security-based swaps regardless to help identify persons with positions large enough to have a material impact on the securities market in general.
Why? Because transparency of such will reduce the potential harm to large networks of interconnected parties that have no influence or knowledge of such.
I believe Rule 10B-1 should require such persons subject to the reporting requirements submit such filings on EDGAR and be publicly accessible.
I believe the commission should require Schedule 10B adhere to a standard
structured data language to allow automated systems to parse the data.
For request for comment prompts regarding Reporting Threshold Amount within different context - I believe the proposed definition of Reporting Threshold Amount should allow for only the very minimum of offsetting or netting of positions.
Why? Because transparency of such will reduce the potential harm to large networks of interconnected parties that have no influence or knowledge of such.
I believe that the proposed requirements regarding the submission of amendments to Schedule 10B as set forth in proposed Rule 10B-1(c) should be lowered to a 5% threshold for increases and decreases of the SBS Position.
I believe the Commission should increase the information required to be disclosed
on Schedule 10B.
I disagree with the Commissions proposal to not require reporting of a reporting
partys counterparties.
Why? Because transparency of such will reduce the potential harm to large networks of interconnected parties that have no influence or knowledge of such. Without the reporting partys counterparties, the usefulness of the underlying information is much reduced.
In cases where a Schedule 10B filing is made for a group of persons, the Commission should require additional information about the group including a brief description of any contracts, arrangements, understandings, or relationships among the person in the group.
Why? Because transparency of such will reduce the potential harm to large networks of interconnected parties that have no influence or knowledge of such.
I believe that proposed Rule 10B-1(d) is sufficient for the moment, but should be revisited after a period to determine effectiveness.
I believe that all information required to be disclosed on proposed Schedule 10B should be included on the Schedule 10B or incorporated in reference as partial answer only.