Magazine article American Banker

Derivatives Users Hit New SEC Rule

Magazine article American Banker

Derivatives Users Hit New SEC Rule

Article excerpt

Like companies that sell derivatives, derivatives users are fighting a new Securities and Exchange Commission regulation they say will be cumbersome to comply with and supply little useful information to investors.

Despite the adversarial relationship between bankers and derivatives clients in the past, the two sides are united in opposition to the new regulation, which required additional disclosure from users.

The SEC rule, which took effect April 11, requires derivatives users to quantify how the instruments could affect their business.

"It's a great thing for lawyers and accountants but a nightmare for users," a lawyer who represents users said at the annual meeting last week in Washington of the End Users of Derivatives Association.

The group also joins traders in its wariness of a proposed Financial Account- ing Standards Board rule on derivatives, which they say would make reported income appear more volatile to investors.

The board had said it would issue the rule in final form June 30. But Timothy Lucas, its director of technical activities, told the skeptical conference crowd that the board might possibly work up a new proposal instead.

The end-user group opposes the FASB proposal in part because it is hard to understand and implement, said Mary S. Carey, associate general counsel at Massachusetts Mutual Life Insurance Co. "Grasping what exactly the FASB wants is going to be really difficult for a lot of people," she said.

Other critics say that enough information on how companies use derivatives is already included in the footnotes of financial statements. …

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