Facing staffing shortages caused by congressional Republicans' reluctance to increase the SEC's budget, the commission on a 3-1 party-line vote proposed making companies responsible for self-assessing their capacity to manage swaps without creating undue risk.

A firm would be required to have a U.S.-based agent and then have a corporate officer attest to it having the financial, operational and compliance capabilities to manage the oversight of swap trades, the ability to keep required records and the ability to screen out any "statutorily disqualified" candidates from trading. The proposed rule asks questions about the exact standards to use.

The SEC also proposed a procedure for conditional registration that later could be made permanent.

The SEC's move to lay out the procedures for registering comes as the swaps industry awaits a commission decision on exactly who has to register.

SEC Chairwoman Mary Schapiro, participating in the meeting from London, said the initiation of registration will give the SEC important added oversight duties. She said the agency will shortly propose rules for capital, margin, segregation, and record-keeping requirements for security-based swaps.

"Registering the major market participants in the largely unregulated security-based swap markets is a critical step toward better protecting investors," she said. She added that the commission is hopeful Democratic Commissioner Elisse B. Walter suggested that the budget constraints forced the commission to cede more power over the registration process than she would prefer.

"In an ideal world, our registration program would include a comprehensive evaluation of each potential registrant immediately and subsequently on a periodic basis once registration is granted," Walter said. "But we do not live in an ideal world. We must account for practical realities and, given the commission's current resources and the low probability that we will be given sufficient resources to fulfill our historical and new mandates, I do not believe that we can perform all the functions I would like to see us perform when an entity applies for registration. In these tough times, we unfortunately have to do more with not enough."

The SEC's only Republican commissioner, Troy A. Paredes, voted against the proposal, saying it was "flawed and problematic," as well as vague.

"The proposed registration regime creates too much uncertainty and gives rise to an unacceptable risk of after-the-fact second-guessing by the commission," he said. Paredes warned that the senior officers who attest to "operational, financial and compliance capabilities" of vague standards aren't being provided sufficient fair notice of any standards.

Thomas V. D'Ambrosio, a partner at Morgan, Lewis & Bockius LLP, said the SEC decision to rely on companies to self-certify is hardly surprising.

"They don't have the manpower and self-certification seems consistent with the way it is supposed to work," he said, adding that other alternatives are impractical. "It would be extremely costly and take forever."

D'Ambrosio said he agreed with Paredes' concerns but predicted the commission would have to provide some leeway during a transition.

The SEC, as expected, also approved the Volcker Rule proposal that had been approved Tuesday by the Federal Reserve, the Federal Deposit Insurance Corp. and the Comptroller of the Currency.