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Federal Register / Vol. 84, No. 139 / Friday, July 19, 2019 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–792; OMB Control No.
3235–0732]
Submission for OMB Review;
Comment Request
Upon Written Request, Copies Available
From: U.S. Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736.
Extension:
Business Conduct Standards for SecurityBased Swap Dealers and Major SecurityBased Swap Participants
jbell on DSK3GLQ082PROD with NOTICES
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(‘‘PRA’’) (44 U.S.C. 3501 et seq.), the
Securities and Exchange Commission
(‘‘Commission’’) has submitted to the
Office of Management and Budget
(‘‘OMB’’) a request for approval of
extension of the previously approved
collection of information provided for in
Business Conduct Standards for
Security-Based Swap Dealers and Major
Security-Based Swap Participants.1 (17
CFR 240.3a67–10, 240.3a71–
3,240.3a71–6, 240.15Fh–1 through
15Fh–6 and 240.15Fk–1), under the
Securities Exchange Act of 1934 (15
U.S.C. 78a et seq.).
In 2010, Congress passed the DoddFrank Act, establishing a comprehensive
framework for regulating the over-thecounter swaps markets. As required by
Title VII of the Dodd-Frank Act, new
section 15F(h) of the Exchange Act
established business conduct standards
for security-based swap (‘‘SBS’’) Dealers
and Major SBS Participants
(‘‘collectively ‘‘SBS Entities’’) in their
dealings with counterparties, including
special entities. In 2016, in order to
implement the Dodd-Frank Act, the
Commission adopted the BCS Rules for
SBS Dealers and Major SBS
Participants,2 a comprehensive set of
business conduct standards and chief
compliance officer requirements
applicable to SBS Entities, that are
designed to enhance transparency,
facilitate informed customer decisionmaking, and heighten standards of
1 Business Conduct Standards for Security-Based
Swap Dealers and Major Security-Based Swap
Participants, Exchange Act Release 77617 (Apr. 14,
2016), 81 FR 29959 (May 13, 2016). See also
Business Conduct Standards for Security-Based
Swap Dealers and Major Security-Based Swap
Participants; Correction, Exchange Act Release
77617A (May 19, 2016), 81 FR 32643 (May 24,
2016). (together, ‘‘the Business Conduct Rules for
SBSDs and MSBSPs’’ or ‘‘BCS Rules’’)
2 Id.
VerDate Sep<11>2014
18:36 Jul 18, 2019
Jkt 247001
professional conduct to better protect
investors.3
Rules 15Fh–1 through 15Fh–6 and
15Fk–1 require SBS Entities to:
• Verify whether a counterparty is an
eligible contract participant and
whether it is a special entity;
• Disclose to the counterparty
material information about the SBS,
including material risks, characteristics,
incentives and conflicts of interest;
• Provide the counterparty with
information concerning the daily mark
of the SBS;
• Provide the counterparty with
information regarding the ability to
require clearing of the SBS;
• Communicate with counterparties
in a fair and balanced manner based on
principles of fair dealing and good faith;
• Establish a supervisory and
compliance infrastructure; and
• Designate a chief compliance officer
that is required to fulfill the described
duties and provide an annual
compliance report.
The rules also require SBS Dealers to:
• Determine that recommendations
they make regarding SBS are suitable for
their counterparties.
• Establish, maintain and enforce
written policies and procedures
reasonably designed to obtain and retain
a record of the essential facts concerning
each known counterparty that are
necessary to conduct business with such
counterparty; and
• Comply with rules designed to
prevent ‘‘pay-to-play.’’
The rules also define what it means to
‘‘act as an advisor’’ to a special entity,
and require an SBS Dealer who acts as
an advisor to a special entity to:
• Make a reasonable determination
that any security-based swap or trading
strategy involving a security-based swap
recommended by the SBS Dealer is in
the best interests of the special entity
whose identity is known at a reasonably
sufficient time prior to the execution of
the transaction to permit the SBS Dealer
to comply with this obligation; and
• Make reasonable efforts to obtain
such information that the SBS Dealer
considers necessary to make a
reasonable determination that a
3 Commission staff has prepared separate
supporting statements pursuant to the Paperwork
Reduction Act (‘‘PRA’’) regarding final Rule 3a71–
3(c) and Rule 3a71–6, which address the crossborder application of the business conduct
standards and the availability of substituted
compliance. The Office of Management and Budget
(‘‘OMB’’) has assigned control number 3235–0717
to Final Rule 3a71–3(c) and 3235–0715 to Final
Rule 3a71–6. Final Rule 3a67–10(d) is a definitional
rule and does not have a PRA burden associated
with it. Rules 3a71–3(a), Rule 15Fh–1 and Rules
15Fh–2(b) and (c) address scope of the rules and
definitions and so do not have PRA burdens
associated with them.
PO 00000
Frm 00129
Fmt 4703
Sfmt 4703
34977
security-based swap or trading strategy
involving a security-based swap is in
the best interests of the known special
entity.
In addition, the rules require SBS
Entities acting as counterparties to
special entities to reasonably believe
that the counterparty has an
independent representative who meets
the following requirements:
• Has sufficient knowledge to
evaluate the transaction and risks;
• Is not subject to a statutory
disqualification;
• Undertakes a duty to act in the best
interests of the special entity;
• Makes appropriate and timely
disclosures to the special entity of
material information concerning the
security-based swap;
• Evaluates, consistent with any
guidelines provided by the special
entity, the fair pricing and the
appropriateness of the security-based
swap;
• Is independent of the security-based
swap dealer or major security-based
swap participant that is the
counterparty to a proposed securitybased swap.
Under the rules, the special entity’s
independent representative must also be
subject to pay-to-play regulations, and if
the special entity is an ERISA plan, the
independent representative must be an
ERISA fiduciary.
The information that must be
collected pursuant to the BCS Rules is
intended to increase accountability and
transparency in the market. The
information will therefore help establish
a framework that protects investors and
promotes efficiency, competition and
capital formation.
Based on a review of recent data, as
of 2018, the Commission estimates the
number of respondents to be as follows:
50 SBS Dealers, 5 Major SBS
Participants, for a total of 55 ‘‘SBS
Entities’’.4 Further, we estimate that
approximately 46 of these 55 SBS
Entities will be dually registered with
the CFTC as Swap Entities. We also
estimate that there are currently 13,137
security-based swap market participants
of which 8,802 are also swap market
participants. In 2018, there were
approximately 593,364 security-based
swap transactions between an SBS
Dealer and counterparty that is not an
SBS Dealer of which 233,595 were new
or amended trades. The Commission
estimates there are 370 independent,
third-party representatives and 20 inhouse independent representatives.5 We
4 Unless otherwise noted, estimates were derived
from the DTCC-TIW data set (February 2019).
5 See, Exchange Act Rule 15Fh–5.
E:\FR\FM\19JYN1.SGM
19JYN1
34978
Federal Register / Vol. 84, No. 139 / Friday, July 19, 2019 / Notices
estimate that there are approximately
13,706 unique SBS Dealer and non-SBSDealer pairs. We have used these
estimates in calculating the hour and
cost burdens for the rule provisions that
reporting and disclosures required by
the BCS Rules, as described above, is
approximately 554,823 hours and
$2,138,000 calculated as follows:
Industrywide annual
burden
(hours)
Industrywide annual
burden
(cost)
$0
0
226,600
233,595
$0
0
137
0
6,853
0
55
55
55
2
540
390
3,600
4,800
0
110
29,700
21,450
198,000
264,000
0
Third–Party Disclosure.
Reporting ...............
Reporting ...............
55
390
0
21,450
0
50
55
1
273
25,600
7,200
50
15,015
1,280,000
396,000.00
................................
......................
....................
....................
554,823
2,138,000
Type of burden
15Fh–3(b), (c), (d): Disclosures—SBS Entities
15Fh–3(b), (c), (d): Disclosures—SBS Transactions Between SBS Dealer and Non-SBSD
Counterparty.
15Fh–3(e), (f): Know Your Counterparty and
Recommendations (SBS Dealers).
15Fh–3(g): Fair and Balanced Communications
15Fh–3(h): Supervision .....................................
15Fh–5: SBS Entities Acting as Counterparties
to Special Entities.
15Fh–5: SBS Entities Acting as Counterparties
to Special Entities.
15Fh–6: Political Contributions ..........................
15Fk–1: Chief Compliance Officer ....................
Reporting ...............
Reporting ...............
55
233,595
4,120
1
Reporting ...............
50
Reporting ...............
Reporting ...............
Reporting ...............
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
under the PRA unless it displays a
currently valid OMB control number.
The public may view background
documentation for this information
collection at the following website:
www.reginfo.gov. Comments should be
directed to: (i) Desk Officer for the
Securities and Exchange Commission,
Office of Information and Regulatory
Affairs, Office of Management and
Budget, Room 10102, New Executive
Office Building, Washington, DC 20503,
or by sending an email to:
Lindsay.M.Abate@omb.eop.gov; and (ii)
Charles Riddle, Acting Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Candace
Kenner, 100 F Street NE, Washington,
DC 20549, or by sending an email to:
PRA_Mailbox@sec.gov. Comments must
be submitted to OMB within 30 days of
this notice.
Dated: July 15, 2019.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–15345 Filed 7–18–19; 8:45 am]
BILLING CODE 8011–01–P
VerDate Sep<11>2014
18:36 Jul 18, 2019
Jkt 247001
Respondents
Ongoing
annual
burden
(hours)
Section
Total ............................................................
jbell on DSK3GLQ082PROD with NOTICES
we anticipate have a ‘‘collection of
information’’ burden within the
meaning of the PRA.
The Commission estimates that the
aggregate burden of the ongoing
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–389, OMB Control No.
3235–0444]
Proposed Collection; Comment
Request
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736.
Extension:
Rule 10b–10
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.) (‘‘PRA’’), the
Securities and Exchange Commission
(‘‘Commission’’) is soliciting comments
on the existing collection of information
provided for in Rule 10b–10 (17 CFR
240.10b–10) under the Securities and
Exchange Act of 1934 (15 U.S.C. 78a et
seq.). The Commission plans to submit
this existing collection of information to
the Office of Management and Budget
(‘‘OMB’’) for extension and approval.
Rule 10b–10 requires broker-dealers
to convey specified information to
customers regarding their securities
transactions. This information includes
the date and time of the transaction, the
identity and number of shares bought or
sold, and whether the broker-dealer acts
as agent for the customer or as principal
for its own account. Depending on
whether the broker-dealer acts as agent
or principal, Rule 10b–10 requires the
disclosure of commissions, as well as
mark-up and mark-down information.
PO 00000
Frm 00130
Fmt 4703
Sfmt 4703
Ongoing
annual
burden
(cost)
For transactions in debt securities, Rule
10b–10 requires the disclosure of
redemption and yield information. Rule
10b–10 potentially applies to all of the
approximately 3,750 firms registered
with the Commission that effect
transactions for or with customers.
Based on information provided by
registered broker-dealers to the
Commission in FOCUS Reports, the
Commission staff estimates that on
average, registered broker-dealers
process approximately 18,843,624,843
order tickets per year for transactions for
or with customers. Each order ticket
representing a transaction effected for or
with a customer generally results in one
confirmation. Therefore, the
Commission staff estimates that
approximately 18,843,624,843
confirmations are sent to customers
annually. The confirmations required by
Rule 10b–10 are generally processed
through automated systems. It takes
approximately 30 seconds to generate
and send a confirmation. Accordingly,
the Commission staff estimates that
broker-dealers spend approximately
157,030,207 hours per year complying
with Rule 10b–10 (18,843,624,843 × .5
÷ 60).
The amount of confirmations sent and
the cost of sending each confirmation
varies from firm to firm. Smaller firms
generally send fewer confirmations than
larger firms because they effect fewer
transactions. The Commission staff
estimates the costs of producing and
sending a paper confirmation, including
postage, to be approximately 63 cents.
The Commission staff also estimates
E:\FR\FM\19JYN1.SGM
19JYN1
]]>Agencies
[Federal Register Volume 84, Number 139 (Friday, July 19, 2019)]
[Notices]
[Pages 34977-34978]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-15345]
[[Page 34977]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[SEC File No. 270-792; OMB Control No. 3235-0732]
Submission for OMB Review; Comment Request
Upon Written Request, Copies Available From: U.S. Securities and
Exchange Commission, Office of FOIA Services, 100 F Street NE,
Washington, DC 20549-2736.
Extension:
Business Conduct Standards for Security-Based Swap Dealers and
Major Security-Based Swap Participants
Notice is hereby given that pursuant to the Paperwork Reduction Act
of 1995 (``PRA'') (44 U.S.C. 3501 et seq.), the Securities and Exchange
Commission (``Commission'') has submitted to the Office of Management
and Budget (``OMB'') a request for approval of extension of the
previously approved collection of information provided for in Business
Conduct Standards for Security-Based Swap Dealers and Major Security-
Based Swap Participants.\1\ (17 CFR 240.3a67-10, 240.3a71-3,240.3a71-6,
240.15Fh-1 through 15Fh-6 and 240.15Fk-1), under the Securities
Exchange Act of 1934 (15 U.S.C. 78a et seq.).
---------------------------------------------------------------------------
\1\ Business Conduct Standards for Security-Based Swap Dealers
and Major Security-Based Swap Participants, Exchange Act Release
77617 (Apr. 14, 2016), 81 FR 29959 (May 13, 2016). See also Business
Conduct Standards for Security-Based Swap Dealers and Major
Security-Based Swap Participants; Correction, Exchange Act Release
77617A (May 19, 2016), 81 FR 32643 (May 24, 2016). (together, ``the
Business Conduct Rules for SBSDs and MSBSPs'' or ``BCS Rules'')
---------------------------------------------------------------------------
In 2010, Congress passed the Dodd-Frank Act, establishing a
comprehensive framework for regulating the over-the-counter swaps
markets. As required by Title VII of the Dodd-Frank Act, new section
15F(h) of the Exchange Act established business conduct standards for
security-based swap (``SBS'') Dealers and Major SBS Participants
(``collectively ``SBS Entities'') in their dealings with
counterparties, including special entities. In 2016, in order to
implement the Dodd-Frank Act, the Commission adopted the BCS Rules for
SBS Dealers and Major SBS Participants,\2\ a comprehensive set of
business conduct standards and chief compliance officer requirements
applicable to SBS Entities, that are designed to enhance transparency,
facilitate informed customer decision-making, and heighten standards of
professional conduct to better protect investors.\3\
---------------------------------------------------------------------------
\2\ Id.
\3\ Commission staff has prepared separate supporting statements
pursuant to the Paperwork Reduction Act (``PRA'') regarding final
Rule 3a71-3(c) and Rule 3a71-6, which address the cross-border
application of the business conduct standards and the availability
of substituted compliance. The Office of Management and Budget
(``OMB'') has assigned control number 3235-0717 to Final Rule 3a71-
3(c) and 3235-0715 to Final Rule 3a71-6. Final Rule 3a67-10(d) is a
definitional rule and does not have a PRA burden associated with it.
Rules 3a71-3(a), Rule 15Fh-1 and Rules 15Fh-2(b) and (c) address
scope of the rules and definitions and so do not have PRA burdens
associated with them.
---------------------------------------------------------------------------
Rules 15Fh-1 through 15Fh-6 and 15Fk-1 require SBS Entities to:
Verify whether a counterparty is an eligible contract
participant and whether it is a special entity;
Disclose to the counterparty material information about
the SBS, including material risks, characteristics, incentives and
conflicts of interest;
Provide the counterparty with information concerning the
daily mark of the SBS;
Provide the counterparty with information regarding the
ability to require clearing of the SBS;
Communicate with counterparties in a fair and balanced
manner based on principles of fair dealing and good faith;
Establish a supervisory and compliance infrastructure; and
Designate a chief compliance officer that is required to
fulfill the described duties and provide an annual compliance report.
The rules also require SBS Dealers to:
Determine that recommendations they make regarding SBS are
suitable for their counterparties.
Establish, maintain and enforce written policies and
procedures reasonably designed to obtain and retain a record of the
essential facts concerning each known counterparty that are necessary
to conduct business with such counterparty; and
Comply with rules designed to prevent ``pay-to-play.''
The rules also define what it means to ``act as an advisor'' to a
special entity, and require an SBS Dealer who acts as an advisor to a
special entity to:
Make a reasonable determination that any security-based
swap or trading strategy involving a security-based swap recommended by
the SBS Dealer is in the best interests of the special entity whose
identity is known at a reasonably sufficient time prior to the
execution of the transaction to permit the SBS Dealer to comply with
this obligation; and
Make reasonable efforts to obtain such information that
the SBS Dealer considers necessary to make a reasonable determination
that a security-based swap or trading strategy involving a security-
based swap is in the best interests of the known special entity.
In addition, the rules require SBS Entities acting as
counterparties to special entities to reasonably believe that the
counterparty has an independent representative who meets the following
requirements:
Has sufficient knowledge to evaluate the transaction and
risks;
Is not subject to a statutory disqualification;
Undertakes a duty to act in the best interests of the
special entity;
Makes appropriate and timely disclosures to the special
entity of material information concerning the security-based swap;
Evaluates, consistent with any guidelines provided by the
special entity, the fair pricing and the appropriateness of the
security-based swap;
Is independent of the security-based swap dealer or major
security-based swap participant that is the counterparty to a proposed
security-based swap.
Under the rules, the special entity's independent representative
must also be subject to pay-to-play regulations, and if the special
entity is an ERISA plan, the independent representative must be an
ERISA fiduciary.
The information that must be collected pursuant to the BCS Rules is
intended to increase accountability and transparency in the market. The
information will therefore help establish a framework that protects
investors and promotes efficiency, competition and capital formation.
Based on a review of recent data, as of 2018, the Commission
estimates the number of respondents to be as follows: 50 SBS Dealers, 5
Major SBS Participants, for a total of 55 ``SBS Entities''.\4\ Further,
we estimate that approximately 46 of these 55 SBS Entities will be
dually registered with the CFTC as Swap Entities. We also estimate that
there are currently 13,137 security-based swap market participants of
which 8,802 are also swap market participants. In 2018, there were
approximately 593,364 security-based swap transactions between an SBS
Dealer and counterparty that is not an SBS Dealer of which 233,595 were
new or amended trades. The Commission estimates there are 370
independent, third-party representatives and 20 in-house independent
representatives.\5\ We
[[Page 34978]]
estimate that there are approximately 13,706 unique SBS Dealer and non-
SBS-Dealer pairs. We have used these estimates in calculating the hour
and cost burdens for the rule provisions that we anticipate have a
``collection of information'' burden within the meaning of the PRA.
---------------------------------------------------------------------------
\4\ Unless otherwise noted, estimates were derived from the
DTCC-TIW data set (February 2019).
\5\ See, Exchange Act Rule 15Fh-5.
---------------------------------------------------------------------------
The Commission estimates that the aggregate burden of the ongoing
reporting and disclosures required by the BCS Rules, as described
above, is approximately 554,823 hours and $2,138,000 calculated as
follows:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Ongoing Ongoing Industry- Industry-
annual annual wide annual wide annual
Section Type of burden Respondents burden burden burden burden
(hours) (cost) (hours) (cost)
--------------------------------------------------------------------------------------------------------------------------------------------------------
15Fh-3(b), (c), (d): Disclosures--SBS Reporting............................... 55 4,120 $0 226,600 $0
Entities.
15Fh-3(b), (c), (d): Disclosures--SBS Reporting............................... 233,595 1 0 233,595 0
Transactions Between SBS Dealer and Non-
SBSD Counterparty.
15Fh-3(e), (f): Know Your Counterparty and Reporting............................... 50 137 0 6,853 0
Recommendations (SBS Dealers).
15Fh-3(g): Fair and Balanced Communications. Reporting............................... 55 2 3,600 110 198,000
15Fh-3(h): Supervision...................... Reporting............................... 55 540 4,800 29,700 264,000
15Fh-5: SBS Entities Acting as Reporting............................... 55 390 0 21,450 0
Counterparties to Special Entities.
15Fh-5: SBS Entities Acting as Third-Party Disclosure.................. 55 390 0 21,450 0
Counterparties to Special Entities.
15Fh-6: Political Contributions............. Reporting............................... 50 1 25,600 50 1,280,000
15Fk-1: Chief Compliance Officer............ Reporting............................... 55 273 7,200 15,015 396,000.00
-----------------------------------------------------------------
Total................................... ........................................ ............ ........... ........... 554,823 2,138,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information under the PRA unless it
displays a currently valid OMB control number.
The public may view background documentation for this information
collection at the following website: www.reginfo.gov. Comments should
be directed to: (i) Desk Officer for the Securities and Exchange
Commission, Office of Information and Regulatory Affairs, Office of
Management and Budget, Room 10102, New Executive Office Building,
Washington, DC 20503, or by sending an email to:
[email protected]; and (ii) Charles Riddle, Acting Director/
Chief Information Officer, Securities and Exchange Commission, c/o
Candace Kenner, 100 F Street NE, Washington, DC 20549, or by sending an
email to: [email protected]. Comments must be submitted to OMB within
30 days of this notice.
Dated: July 15, 2019.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-15345 Filed 7-18-19; 8:45 am]
BILLING CODE 8011-01-P
