MFA submitted a comment letter to the U.S. Securities and Exchange Commission (SEC) in response to its proposed rule 9j-1. MFA highlights that, while we support the objective, the broad nature of the proposed rule will inadvertently capture good-faith, legitimate activity. In the letter, MFA explains that:
- The scope of re-proposed Rule 9j-1 exceeds the Commission’s statutory authority to regulate the “purchase” or “sale” of security-based swaps by including within the scope of the prohibitions interim actions in performance of contractual obligations during the life cycle of a security-based swap.
- The proposed safe harbors are overly restrictive and not sufficiently clear, and do not adequately protect from liability market participants engaged in good-faith performance of their obligations under security-based swap agreements.
- Re-proposed Rules 9j-1(a)(3) and (4) should include a scienter standard to account for the unique aspects of security-based swap transactions.
- The Commission should extend to potential violations of re-proposed Rule 9j-1 the affirmative defenses that are available under Rule 10b5-1.
- The scope of proposed Rule 9j-1(b) is overly broad and will have a chilling effect on the security-based swap markets and the markets for the underlying securities.
