Order Granting Conditional Substituted Compliance in Connection With Certain Requirements Applicable to Non-U.S. Security-Based Swap Dealers Subject to Regulation in the Swiss Confederation, 57455-57469 [2021-22475]

Download as PDF Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Notices requests for reasonable accommodation will be made on a case-by-case basis. Members of the public may request to receive this information electronically. If you would like to be added to the distribution, please contact the Nuclear Regulatory Commission, Office of the Secretary, Washington, DC 20555, at 301–415–1969, or by email at Tyesha.Bush@nrc.gov or Betty.Thweatt@ nrc.gov. The NRC is holding the meetings under the authority of the Government in the Sunshine Act, 5 U.S.C. 552b. Dated: October 13, 2021. For the Nuclear Regulatory Commission. Wesley W. Held, Policy Coordinator, Office of the Secretary. [FR Doc. 2021–22678 Filed 10–13–21; 4:15 pm] BILLING CODE 7590–01–P POSTAL REGULATORY COMMISSION [Docket Nos. MC2022–7 and CP2022–8] New Postal Product Postal Regulatory Commission. Notice. AGENCY: ACTION: The Commission is noticing a recent Postal Service filing for the Commission’s consideration concerning a negotiated service agreement. This notice informs the public of the filing, invites public comment, and takes other administrative steps. DATES: Comments are due: October 19, 2021. ADDRESSES: Submit comments electronically via the Commission’s Filing Online system at http:// www.prc.gov. Those who cannot submit comments electronically should contact the person identified in the FOR FURTHER INFORMATION CONTACT section by telephone for advice on filing alternatives. SUMMARY: FOR FURTHER INFORMATION CONTACT: David A. Trissell, General Counsel, at 202–789–6820. SUPPLEMENTARY INFORMATION: Table of Contents I. Introduction II. Docketed Proceeding(s) I. Introduction The Commission gives notice that the Postal Service filed request(s) for the Commission to consider matters related to negotiated service agreement(s). The request(s) may propose the addition or removal of a negotiated service agreement from the market dominant or the competitive product list, or the modification of an existing product VerDate Sep<11>2014 16:50 Oct 14, 2021 Jkt 256001 currently appearing on the market dominant or the competitive product list. Section II identifies the docket number(s) associated with each Postal Service request, the title of each Postal Service request, the request’s acceptance date, and the authority cited by the Postal Service for each request. For each request, the Commission appoints an officer of the Commission to represent the interests of the general public in the proceeding, pursuant to 39 U.S.C. 505 (Public Representative). Section II also establishes comment deadline(s) pertaining to each request. The public portions of the Postal Service’s request(s) can be accessed via the Commission’s website (http:// www.prc.gov). Non-public portions of the Postal Service’s request(s), if any, can be accessed through compliance with the requirements of 39 CFR 3011.301.1 The Commission invites comments on whether the Postal Service’s request(s) in the captioned docket(s) are consistent with the policies of title 39. For request(s) that the Postal Service states concern market dominant product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3622, 39 U.S.C. 3642, 39 CFR part 3030, and 39 CFR part 3040, subpart B. For request(s) that the Postal Service states concern competitive product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3632, 39 U.S.C. 3633, 39 U.S.C. 3642, 39 CFR part 3035, and 39 CFR part 3040, subpart B. Comment deadline(s) for each request appear in section II. II. Docketed Proceeding(s) 1. Docket No(s).: MC2022–7 and CP2022–8; Filing Title: USPS Request to Add Priority Mail Express Contract 92 to Competitive Product List and Notice of Filing Materials Under Seal; Filing Acceptance Date: October 8, 2021; Filing Authority: 39 U.S.C. 3642, 39 CFR 3040.130 through 3040.135, and 39 CFR 3035.105; Public Representative: Christopher C. Mohr; Comments Due: October 19, 2021. This Notice will be published in the Federal Register. Erica A. Barker, Secretary. [FR Doc. 2021–22505 Filed 10–14–21; 8:45 am] BILLING CODE 7710–FW–P 1 See Docket No. RM2018–3, Order Adopting Final Rules Relating to Non-Public Information, June 27, 2018, Attachment A at 19–22 (Order No. 4679). PO 00000 Frm 00049 Fmt 4703 Sfmt 4703 57455 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–93284; File No. S7–07–21] Order Granting Conditional Substituted Compliance in Connection With Certain Requirements Applicable to Non-U.S. Security-Based Swap Dealers Subject to Regulation in the Swiss Confederation October 8, 2021. I. Overview UBS AG and Credit Suisse AG (the ‘‘Swiss Firms’’) submitted an application requesting that the Securities and Exchange Commission (‘‘Commission’’) determine, pursuant to the Securities Exchange Act of 1934 (‘‘Exchange Act’’) rule 3a71–6, that security-based swap dealers (‘‘SBSDs’’) subject to regulation in the Swiss Confederation (‘‘Switzerland’’) conditionally may satisfy requirements under the Exchange Act by complying with comparable Swiss requirements.1 The Swiss Firms sought substituted compliance in connection with certain Exchange Act requirements related to risk control, internal supervision and compliance, and record keeping, reporting, and notification.2 The Swiss Application incorporated comparability analyses between the relevant requirements in Exchange Act section 15F and the rules and regulations thereunder and applicable Swiss law, as well as information regarding Swiss supervisory and enforcement frameworks. On August 10, 2021, the Commission issued a notice of the Swiss Application, accompanied by a proposed order (the ‘‘proposed Order’’) to make a positive substituted compliance determination in 1 See Letter from Colin Lloyd of Cleary Gottlieb Steen & Hamilton LLP on behalf of UBS AG and Credit Suisse AG to Vanessa Countryman, Secretary, Commission, dated August 10, 2021 (the ‘‘Swiss Application’’). The Swiss Application is available on the Commission’s website at: https:// www.sec.gov/page/exchange-act-substitutedcompliance-and-listed-jurisdiction-applicationssecurity-based-swap. 2 ‘‘Risk control’’ includes requirements related to internal risk management, trade acknowledgment and verification, portfolio reconciliation and dispute resolution, portfolio compression and trading relationship documentation; ‘‘internal supervision and compliance’’ includes requirements related to diligent supervision, conflicts of interest, information gathering under Exchange Act section 15F(j), 15 U.S.C. 78o–10(j), and chief compliance officers; ‘‘record keeping, reporting, and notification’’ includes requirements related to making and keeping current certain prescribed records, preservation of records, reporting, and notification. E:\FR\FM\15OCN1.SGM 15OCN1 57456 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Notices connection with the Swiss Application.3 The proposed Order incorporated a number of conditions to tailor the scope of substituted compliance consistent with the prerequisite that relevant Swiss requirements produce regulatory outcomes that are comparable to relevant requirements under the Exchange Act. As discussed below, the Commission is adopting a final Order that has been modified from the proposal to make clarifying changes in response to comments. II. Substituted Compliance Framework and Prerequisites A. Substituted Compliance Framework and Purpose As the Commission has discussed previously,4 Exchange Act rule 3a71–6 provides a framework whereby non-U.S. SBSDs and major security-based swap participants (‘‘MSBSPs’’) (together, ‘‘SBS Entities’’) may satisfy certain requirements under Exchange Act section 15F by complying with comparable regulatory requirements of a foreign jurisdiction.5 Because substituted compliance does not constitute exemptive relief, but instead provides an alternative method by which non-U.S. SBS Entities may comply with applicable Exchange Act requirements, the non-U.S. SBS Entities would remain subject to the relevant requirements under section 15F. The Commission accordingly will retain the authority to inspect, examine and supervise those SBS Entities’ compliance and take enforcement action as appropriate. Under the substituted compliance framework, failure to comply with the applicable foreign requirements and other conditions to a substituted compliance order would lead to a violation of the applicable requirements under the Exchange Act and potential enforcement action by the Commission (as opposed to automatic revocation of the substituted compliance order). 3 See Exchange Act Release No. 92632 (Aug. 10, 2021), 86 FR 45770, 45792 (‘‘Swiss Substituted Compliance Notice and Proposed Order’’). 4 See Exchange Act Release No. 90765 (Dec. 22, 2020), 85 FR 85686, 85687 (Dec. 29, 2020) (‘‘German Substituted Compliance Order’’); Exchange Act Release No. 92484 (July 23, 2021), 86 FR 41612, 41612–13 (Aug. 2, 2021) (‘‘French Substituted Compliance Order’’); Exchange Act Release No. 92529 (July 30, 2021), 86 FR 43318, 43318–19 (Aug. 6, 2021) (‘‘UK Substituted Compliance Order’’); Exchange Act Release No. 47668 (August 20, 2021), 85 FR 47668, 47668–69 (Aug. 26, 2021) (‘‘Spanish Substituted Compliance Notice and Proposed Order’’). 5 See Exchange Act Release No. 77617 (Apr. 14, 2016), 81 FR 29960, 30079 (May 13, 2016) (‘‘Business Conduct Adopting Release’’). VerDate Sep<11>2014 16:50 Oct 14, 2021 Jkt 256001 Under rule 3a71–6, substituted compliance potentially is available in connection with certain section 15F requirements,6 but is not available in connection with antifraud prohibitions and certain other requirements under the Federal securities laws.7 SBS Entities in Switzerland accordingly must comply directly with those requirements notwithstanding the availability of substituted compliance for other requirements. The substituted compliance framework reflects the cross-border nature of the security-based swap market, and is intended to promote efficiency and competition by helping to address potential duplication and inconsistency between relevant U.S. and foreign requirements.8 In practice, substituted compliance may be expected to help SBS Entities leverage their existing systems and practices to comply with relevant Exchange Act requirements in conjunction with their compliance with relevant foreign requirements. As of August 6, 2021, market participants have been required to assess whether their security-based swap activities meet or exceed certain thresholds for registration with the Commission as SBS Entities, with the first registrations by SBSDs required by November 1, 2021, and by MSBSPs by December 1, 2021.9 Substituted compliance may be expected to assist such market participants in preparing for registration. B. Scope of Substituted Compliance The Swiss Application relates solely to entity-level requirements and for entity-level Exchange Act requirements a Covered Entity must choose either to apply substituted compliance pursuant to the Order with respect to all security6 17 CFR 240.3a71–6(d). Substituted Compliance Notice and Proposed Order, 86 FR at 45771 n.5 (addressing unavailability of substituted compliance in connection with antifraud provisions, as well as provisions related to transactions with counterparties that are not eligible contract participants (‘‘ECPs’’), segregation of customer assets, required clearing upon counterparty election, regulatory reporting and public dissemination, and registration of offerings). 8 See generally Business Conduct Adopting Release, 81 FR at 30073 (noting that the crossborder nature of the security-based swap market poses special regulatory challenges, in that relevant U.S. requirements ‘‘have the potential to lead to requirements that are duplicative of or in conflict with applicable foreign business conduct requirements, even when the two sets of requirements implement similar goals and lead to similar results’’). 9 See ‘‘Key Dates for Registration of SecurityBased Swap Dealers and Major Security-Based Swap Participants,’’ available at https:// www.sec.gov/page/key-dates-registration-securitybased-swap-dealers-and-major-security-basedswap-participants. 7 Swiss PO 00000 Frm 00050 Fmt 4703 Sfmt 4703 based swap business subject to the relevant Swiss requirements or to comply directly with the Exchange Act with respect to all such business; a Covered Entity may not choose to apply substituted compliance for some of the business subject to the relevant Swiss requirements and comply directly with the Exchange Act for another part of the business that is subject to the relevant Swiss requirements. Additionally, for entity-level Exchange Act requirements, if the Covered Entity also has securitybased swap business that is not subject to the relevant Swiss requirements, the Covered Entity must either comply directly with the Exchange Act for that business or comply with the terms of another applicable substituted compliance order. C. Specific Prerequisites 1. Comparability of Regulatory Outcomes Rule 3a71–6, adopted by the Commission in 2016, describes the requirements for the Commission to make a substituted compliance determination. Under the rule, the Commission must determine that the analogous foreign requirements are comparable to otherwise applicable requirements under the Exchange Act (i.e., the relevant requirements in the Exchange Act and the rules and regulations thereunder), after accounting for factors such as ‘‘the scope and objectives of the relevant foreign regulatory requirements’’ and ‘‘the effectiveness of the supervisory compliance program administered, and the enforcement authority exercised’’ by the foreign authority.10 The comparability assessments are to be based on a ‘‘holistic approach’’ that ‘‘will focus on the comparability of regulatory outcomes rather than predicating substituted compliance on requirement-by-requirement similarity.’’ 11 10 Exchange Act rule 3a71–6(a)(2)(i). Swiss Substituted Compliance Notice and Proposed Order, 86 FR at 45772; see also Business Conduct Adopting Release, 81 FR at 30078-79 (further recognizing that ‘‘different regulatory systems may be able to achieve some or all of those regulatory outcomes by using more or fewer specific requirements than the Commission, and that in assessing comparability the Commission may need to take into account the manner in which other regulatory systems are informed by business and market practices in those jurisdictions’’). The Commission’s assessment of a foreign authority’s supervisory and enforcement effectiveness—as part of the broader comparability analysis—would be expected to consider not only overall oversight activities, but also oversight specifically directed at conduct and activity relevant to the substituted compliance determination. ‘‘For example, it would be difficult for the Commission to make a comparability determination in support of 11 See E:\FR\FM\15OCN1.SGM 15OCN1 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Notices 2. Memorandum of Understanding Exchange Act rule 3a71–6(a)(2)(ii) further predicates the availability of substituted compliance on the Commission and the foreign financial regulatory authority or authorities entering into a supervisory and enforcement memorandum of understanding and/or other arrangement with the relevant foreign financial regulatory authorities ‘‘addressing supervisory and enforcement cooperation and other matters arising under the substituted compliance determination.’’ 12 Accordingly, the Commission and FINMA recently entered into a relevant memorandum of understanding.13 The memorandum of understanding must be in place when Covered Entities use substituted compliance to satisfy obligations under the Exchange Act.14 3. Certification and Opinion of Counsel A party or group of parties that may potentially rely on a substituted compliance order may submit a substituted compliance application only if each such party provides a certification and opinion of counsel that the entity can, ‘‘as a matter of law, provide the Commission with prompt access to its books and records, and can, as a matter of law, submit to onsite inspection and examination by the Commission.’’ 15 The Swiss Application included a certification and opinion of counsel and, in the Commission’s preliminary view, met this requirement.16 The Commission received no comments on this preliminary view and has not changed its view. substituted compliance if oversight is directed solely at the local activities of foreign securitybased swap dealers, as opposed to the cross-border activities of such dealers.’’ Business Conduct Adopting Release, 81 FR at 30079 (footnote omitted). In the Swiss Substituted Compliance Notice and Proposed Order, the Commission preliminarily concluded that this comparability prerequisite was met in connection with a number of requirements under the Exchange Act, in some cases with the addition of conditions to help ensure the comparability of regulatory outcomes. 12 See Exchange Act rule 3a71–6(a)(2)(ii). 13 The Commission and FINMA have entered into a memorandum of understanding to address substituted compliance cooperation, a copy of which is on the Commission’s website at www.sec.gov under the ‘‘Substituted Compliance’’ tab, which is located on the ‘‘Security-Based Swap Markets’’ page in the Division of Trading and Markets section of the site. 14 See para. (a)(8) of the Order. 15 See Exchange Act rule 3a71–6(c)(1)(ii). 16 See Swiss Substituted Compliance Notice and Proposed Order, 86 FR at 45771 n.8. VerDate Sep<11>2014 16:50 Oct 14, 2021 Jkt 256001 III. General Availability of Substituted Compliance Under the Order A. Covered Entities 1. Proposed Approach Under the proposed Order, substituted compliance was only made available to ‘‘Covered Entities’’—a defined term that would limit the scope of the substituted compliance determination to SBSDs that are subject to applicable Swiss requirements and oversight. Consistent with the parameters of substituted compliance under Exchange Act rule 3a71–6, the proposed ‘‘Covered Entity’’ definition provided that the relevant entity must be a security-based swap dealer registered with the Commission, and that the entity cannot be a U.S. person.17 The proposed ‘‘Covered Entity’’ definition further provided that the entity must be a systemically important bank authorized by FINMA to conduct banking activities in Switzerland.18 Each entity would also have to be supervised by FINMA under the intensive and continual supervision model as a Category 1 firm as that term is defined in BO Annex 3.19 These prongs of the definition were intended to help ensure that Covered Entities are subject to relevant Swiss requirements and oversight. 2. Commenter Views and Final Provisions No commenters addressed the proposed Covered Entity definition and the Commission is adopting the definition as proposed. B. Additional General Conditions 1. Proposed Approach The proposed Order incorporated a number of additional general conditions and other prerequisites, to help ensure that the relevant Swiss requirements that form the basis for substituted compliance in practice will apply to the Covered Entity’s security-based swap business and activities, and to promote the Commission’s oversight over entities that avail themselves of substituted compliance: • ‘‘Subject to and Complies with’’ applicability condition—For each relevant section of the proposed Order, a positive substituted compliance determination would be predicated on the entity being subject to and complying with the applicable Swiss 17 See Swiss Substituted Compliance Notice and Proposed Order, 86 FR at 45791. 18 Id. 19 Id. PO 00000 Frm 00051 Fmt 4703 Sfmt 4703 57457 requirements needed to establish comparability.20 • Security-based swaps and transactions as ‘‘derivatives’’ or ‘‘derivative transactions’’—For each relevant section of the proposed Order that requires the application of, and the Covered Entity’s compliance with, provisions of FinMIA and FMIO, a positive substituted compliance determination would require that the relevant security-based swaps and security-based swap transactions are ‘‘derivatives’’ and/or ‘‘derivative transactions’’ for purposes of FinMIA article 2(c), or otherwise is described by the relevant language of that provision.21 • ‘‘Counterparty’’ status—For each section of the proposed Order that requires the application of, and the Covered Entity’s compliance with, the provisions of FinMIA and FMIO, the proposed Order would require that the Covered Entity comply with the applicable conditions of the Order regardless of whether the Covered Entity’s counterparty is a ‘‘counterparty’’ for purposes of FinMIA article 93, or otherwise is described by the relevant language of that provision.22 • Counterparty status as ‘‘company’’—For each section of the proposed Order that requires the application of, and the Covered Entity’s compliance with, the provisions of FMIO, the Covered Entity would be required to comply with the applicable conditions of the proposed Order regardless of whether a Covered Entity’s counterparty were a ‘‘company’’ for purposes of FMIO article 77, or otherwise is described by the relevant language of that provision.23 • Covered Entity as ‘‘bank’’—For each condition of the proposed Order that requires the application of, and the Covered Entity’s compliance with, the provisions of the BA and BO and/or other Swiss requirements adopted pursuant to those provisions, the Covered Entity would be required to be a ‘‘bank’’ for purposes of BA article 1a, or otherwise is described by the relevant language of that provision.24 • Covered Entity as ‘‘systemically important’’—For each condition of the proposed Order that requires the application of, and the Covered Entity’s compliance with, the provisions of FINMA Circular 2017/1, the Covered 20 See Swiss Substituted Compliance Notice and Proposed Order, 86 FR at 45788. 21 Id. 22 Id. 23 Id. 24 Id. E:\FR\FM\15OCN1.SGM 15OCN1 57458 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Notices Entity would be required to be ‘‘systemically important’’ for purposes of BA article 8(3), or otherwise is described by the relevant language of that provision.25 • Covered Entity as ‘‘category 1’’—For each condition of the proposed Order that required the application of, and the Covered Entity’s compliance with, the provisions of FINMA Circular 2017/1, the Covered Entity would be required to be supervised as ‘‘category 1,’’ as defined in BO articles 2(2) and 2(3) and BO Annex 3, or otherwise is described by the relevant language of those provisions.26 • ‘‘Institution-specific approach’’ to operational risk quantification—For each condition in the proposed Order that requires the application of, and the Covered Entity’s compliance with, the provisions of FINMA Circular 2008/21 margins 45–107, the Covered Entity would be required to apply he ‘‘institution-specific approach’’ to quantifying capital requirements for operational risk, as defined in CAO article 94, or otherwise is described by the relevant language of those provisions, and as approved by FINMA.27 • Memorandum of understanding— Consistent with the requirements of rule 3a71–6 and the Commission’s need for access to information regarding registered entities, substituted compliance under the proposed Order would be conditioned on the Commission having an applicable memorandum of understanding or other arrangement with FINMA addressing cooperation with respect to the Order at the time the Covered Entity makes use of substituted compliance.28 • Notice of reliance on substituted compliance—To assist the Commission’s oversight of firms that avail themselves of substituted compliance, a Covered Entity relying on the Order would have to provide notice of its intent to rely on the Order by notifying the Commission in the manner specified on the Commission’s website.29 In the notice, the Covered Entity would need to identify each specific substituted compliance determination in the proposed Order for which the Covered Entity intends to apply substituted compliance.30 If a 25 Id. 26 Id. 27 Id. 28 Id. 29 Id. 30 See para. (a)(9) of the Order. If the Covered Entity intends to rely on all the substituted compliance determinations in a given paragraph of the Order, it can cite that paragraph in the notice. For example, if the Covered Entity intends to rely VerDate Sep<11>2014 16:50 Oct 14, 2021 Jkt 256001 Covered Entity were to elect not to apply substituted compliance with respect to a specific substituted compliance determination in the proposed Order, it would be required to comply with the Exchange Act requirements subject to that determination. Finally, a Covered Entity would have to promptly update its notice to the Commission if it intended to modify its reliance on the positive substituted compliance determinations in the proposed Order.31 • Notification related to changes in capital category—Covered Entities with a prudential regulator would need to apply substituted compliance with respect to the requirements of Exchange Act rule 18a–8(c) and the requirements of Exchange Act rule 18a–8(h) as applied to Exchange Act rule (c).32 Exchange Act rule 18a–8(c) generally requires every security-based swap dealer with a prudential regulator that files a notice of adjustment of its reported capital category with the Federal Reserve Board, the Office of the Comptroller of the Currency, or the Federal Deposit Insurance Corporation to give notice of this fact to the that same day by transmitting a copy to the Commission of the notice of adjustment on the risk control determinations in paragraph (b) of the Order, it would indicate in the notice that it is relying on the determinations in paragraph (b). However, if the Covered Entity intends to rely on the internal risk management, trade acknowledgement and verification, and portfolio reconciliation determinations but not the portfolio compression determination, it would need to indicate in the notice that it is relying on paragraphs (b)(1)–(3) of the Order. In this case, paragraph (b)(4) of the Order (the portfolio compression determination) would be excluded from the notice and the Covered Entity would need to comply with the Exchange Act portfolio compression requirements. Further, as discussed below in section VI.B, the recordkeeping and reporting determinations in the Order have been structured to provide Covered Entities with a high level of flexibility in selecting specific requirements within those rules for which they want to rely on substituted compliance. For example, paragraph (d)(1)(i) of the Order sets forth the Commission’s preliminary substituted compliance determinations with respect to the requirements of Exchange Act rule 18a–5, 17 CFR 240.18a–5. These determinations are set forth in paragraphs (d)(1)(i)(A) through (K). If a Covered Entity intends to rely on some but not all of the determinations, it would need to identify in the notice the specific determinations in this paragraph it intends to rely on (e.g., paragraphs (d)(1)(i)(A), (B), (C), (D), (G), (H), (I), and (K)). For any determinations excluded from the notice, the Covered Entity would need to comply with the Exchange Act rule 18a–5 requirement. 31 A Covered Entity would modify its reliance on the positive substituted compliance determinations in the Order, and thereby trigger the requirement to update its notice, if it adds or subtracts determinations for which it is applying substituted compliance or completely discontinues its reliance on the Order. 32 See Swiss Substituted Compliance Notice and Proposed Order, 86 FR at 45788. PO 00000 Frm 00052 Fmt 4703 Sfmt 4703 of reported capital category in accordance with Exchange Act rule 18a– 8(h).33 Exchange Act rule 18a–8(h) sets forth the manner in which every notice or report required to be given or transmitted pursuant to Exchange Act rule 18a–8 must be made. While Exchange Act rule 18a–8(c) is not linked to an Exchange Act capital requirement, it is linked to capital requirements in the U.S. promulgated by the prudential regulators. In its application, the Swiss Firms cited various Swiss provisions as providing similar outcomes to the notifications requirements of Exchange Act Rule 18a–8.34 This general condition would be designed to clarify that a prudentially regulated Covered Entity must provide the Commission with copies of any notifications regarding changes in the Covered Entity’s capital situation required by Swiss law. The intent is to align the notification requirement with the Swiss capital requirements applicable to the Covered Entity. 2. Commenter Views and Final Provisions The Commission did not receive comments addressing the substance of the proposed Order’s additional general conditions, and the Commission is issuing those general conditions largely as proposed.35 In the Commission’s view, the conditions are structured appropriately to predicate a positive substituted compliance determination on the applicability of relevant Swiss requirements needed to establish comparability, as well as on the continued effectiveness of the requisite memorandum of understanding, and the provision of notice to the Commission regarding the Covered Entity’s intent to rely on substituted compliance. The Commission did receive one comment recommending two typographical changes to the general conditions, which the Commission is incorporating in the Order.36 33 17 CFR 240.18a–8(c) and (h). FINMASA article 29(2); CAO articles 14, 42(3), 101, and 130(4); and Liquidity Ordinance articles 17b and 26(2). 35 See paras. (a)(1) through (10) of the Order. 36 See Letter from Gordon Kiesling, Managing Director, UBS AG, Thomas Bischof, Managing Director, UBS AG, Maria Chiodi, Managing Director, Credit Suisse AG, and Drew Shoemaker, Managing Director, Credit Suisse AG (Sept. 10, 2021) (‘‘Swiss Firms’ Letter’’) at Annex (proposing edits to paragraphs (a)(2) and (a)(6) of the Order to add the word ‘‘whether’’ to (a)(2) and to change ‘‘is’’ to ‘‘are’’ in (a)(6)). 34 See E:\FR\FM\15OCN1.SGM 15OCN1 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Notices IV. Substituted Compliance for Risk Control Requirements A. Proposed Approach The Swiss Application in part requested substituted compliance in connection with risk control requirements relating to: • Internal risk management—Internal risk management system requirements that address the obligation of registered entities to follow policies and procedures reasonably designed to help manage the risks associated with their business activities. • Trade acknowledgment and verification—Trade acknowledgment and verification requirements intended to help avoid legal and operational risks by requiring definitive written records of transactions and procedures to avoid disagreements regarding the meaning of transaction terms. • Portfolio reconciliation and dispute reporting—Portfolio reconciliation and dispute reporting provisions that require that counterparties engage in portfolio reconciliation and resolve discrepancies in connection with uncleared securitybased swaps, and to provide prompt notification to the Commission and applicable prudential regulators regarding certain valuation disputes. • Portfolio compression—Portfolio compression provisions that require that SBS Entities have procedures addressing bilateral offset, bilateral compression and multilateral compression in connection with uncleared security-based swaps. • Trading relationship documentation—Trading relationship documentation provisions that require SBS Entities to have procedures to execute written security-based swap trading relationship documentation with their counterparties prior to, or contemporaneously with, executing certain security-based swaps.37 Taken as a whole, these risk control requirements help to promote market stability by mandating that registered entities follow practices that are appropriate to manage the market, counterparty, operational, and legal risks associated with their securitybased swap businesses. No Proposed Positive Substituted Compliance Determination—Dispute Reporting and Trading Relationship Documentation: In connection with dispute reporting and trading relationship documentation, the 37 See Exchange Act Release No. 87782 (Dec. 18, 2019) 85 FR 6359, 6361 (Feb. 4, 2020) (‘‘Risk Mitigation Adopting Release’’).The Swiss Application discusses Swiss requirements regarding records of agreements with counterparties. See Swiss Application section II.1.c at 17–19, 24–31. VerDate Sep<11>2014 16:50 Oct 14, 2021 Jkt 256001 Commission stated a preliminary view that the Swiss requirements were not comparable to Exchange Act requirements.38 The Commission noted in its initial assessment of the comparability of dispute reporting requirements that paragraph (c) of Exchange Act rule 15Fi–3 requires SBSDs to promptly report to the Commission valuation disputes in excess of $20 million that have been outstanding for three or five business days (depending on counterparty types),39 and that Swiss law lacks a specific requirement for reporting security-based swap valuation disputes in excess of $20 million.40 The Commission noted in its initial assessment of trading relationship documentation requirements that Exchange Act rule 15Fi–5 requires that ‘‘security-based swap trading relationship documentation shall be in writing and shall include all terms governing the trading relationship between the security-based swap dealer . . . and its counterparty,’’ 41 and that under Swiss law there is no explicit requirement to agree in writing to all terms governing the trading relationship.42 Considering these and other differences described in the proposed Order,43 the Commission did not propose to make a positive substituted compliance determination with respect to dispute reporting or trading relationship documentation requirements. Proposed Positive Substituted Compliance Determination—Internal Risk Management, Trade Acknowledgement and Verification, Portfolio Reconciliation and Portfolio Compression: With respect to these risk control requirements, the Commission stated a preliminary view based on the Swiss Application and the Commission’s review of applicable provisions, that relevant Swiss requirements would produce regulatory outcomes that are comparable to those associated with the internal risk management, trade acknowledgement and verification, portfolio reconciliation, and portfolio compression risk control requirements. Substituted compliance for those risk 38 See Swiss Substituted Compliance Notice and Proposed Order, 86 FR at 45774–75 (excluding Exchange Act rule 15Fi–3(c) covering reporting of security-based swap valuation disputes from the risk control provisions covered by paragraph (b)(3) the proposed Order). 39 See 17 CFR 240.15Fi–3(c). 40 See Swiss Substituted Compliance Notice and Proposed Order, 86 FR at 45774–75. 41 See 17 CFR 240.15Fi–5(b)(1). 42 See Swiss Substituted Compliance Notice and Proposed Order, 86 FR at 45775. 43 See id. PO 00000 Frm 00053 Fmt 4703 Sfmt 4703 57459 control requirements accordingly would be conditioned on Covered Entities being subject to and complying with the Swiss provisions that in the aggregate establish a framework that produces outcomes comparable to those associated with the analogous risk control requirements under the Exchange Act.44 • Proposed Positive Substituted Compliance Determination Conditions—Portfolio Reconciliation: In connection with portfolio reconciliation requirements, the Commission stated a preliminarily view that Swiss requirements are comparable to Exchange Act requirements, but only when part of one of the applicable Swiss requirements is not applied. The proposed Order therefore included the requirement that a Covered Entity be subject to and comply with FinMIA 108(b) and also the requirement that Covered Entities not apply FinMIA article 108(b)’s exception for ‘‘small non-financial counterparties’’ as defined in FinMIA article 98.45 • Proposed Positive Substituted Compliance Determination Conditions—Portfolio Compression: In connection with portfolio compression requirements, the Commission stated its preliminary view that Swiss requirements were comparable to Exchange Act requirements, but only when one of the applicable Swiss exclusions is not applied. The proposed Order included the requirement that a Covered Entity be subject to and comply with FinMIA article 108(d) and also include a requirement that Covered Entities not apply the portion of FinMIA article 108(d) that excludes application of its requirements when there are fewer than 500 non-centrally cleared OTC derivatives transactions outstanding.46 B. Commenter Views and Final Provisions 1. General Considerations Trading Relationship Documentation: The Commission received one comment 44 See Swiss Substituted Compliance Notice and Proposed Order, 86 FR at 45788. (listing in paragraph (b)(1) of the proposed Order the requirements a Covered Entity must be subject to and comply with in connection with internal risk management, in paragraph (b)(2) the requirements a Covered Entity must be subject to and comply with in connection with trade acknowledgement and verification, in paragraph (b)(3) the requirements a Covered Entity must be subject to and comply with in connection with portfolio reconciliation, and paragraph (b)(4) the requirements a Covered Entity must be subject to and comply with in connection with portfolio compression). 45 See Swiss Substituted Compliance Notice and Proposed Order, 86 FR at 45788. 46 See Swiss Substituted Compliance Notice and Proposed Order, 86 FR at 45788. E:\FR\FM\15OCN1.SGM 15OCN1 57460 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Notices concerning the risk control requirements that specifically addressed trading relationship documentation.47 In its letter, the commenter disagreed with the Commission’s preliminary view not to make a positive substituted compliance determination for the trading relationship documentation requirements of Exchange Act rule 15Fi–5.48 In support of its position the commenter generally noted the ‘‘various documentation-related requirements as listed in the Swiss Application,’’ 49 and cited as its primary example that Swiss law ‘‘does impose an obligation on a Covered Entity to perform daily internal valuations for risk management purposes.’’ 50 While the described obligation may be relevant for requirements related to portfolio reconciliation and internal risk management, it did not address the Exchange Act’s trading relationship documentation requirement that SBSDs have procedures to ensure that trading relationship documentation is executed with counterparties prior to, or contemporaneously with, executing certain security-based swap transactions.51 Additionally, consistent with the Swiss Application’s statement that under Swiss law ‘‘there is no explicit requirement to agree in writing to all terms governing the trading relationship,’’ 52 the commenter’s letter notes that ‘‘Swiss law does not specifically require Covered Entities to agree with counterparties on the process for valuing each SBS.’’ 53 Although the commenter asserted that ‘‘parties will in practice agree on how SBS are valued,’’ 54 the Commission has previously stated that voluntary market practices do not establish the requisite supervisory framework or enforcement authority to establish the specific regulatory requirements of Exchange Act section 15Fi–5.55 Additionally, the commenter asserted that the ‘‘documentation requirement is intended to ensure parties always have legal certainty regarding their contractual obligations to each other,’’ but proceeded to note that its current practices under Swiss law do not always 47 See Swiss Firms’ Letter at 1–4. 48 See Swiss Substituted Compliance Notice and Proposed Order, 86 FR at 45775. 49 See Swiss Firms’ Letter at 2. 50 See Swiss Firms’ Letter at 2. 51 17 CFR 240.15Fi–5(a)(2), Exchange Act rule 15Fi–5(a)(2). 52 See Swiss Application section II.1.c at 24. 53 See Swiss Firms’ Letter at 2. 54 Id. 55 See Swiss Substituted Compliance Notice and Proposed Order, 86 FR at 45775 n.53. VerDate Sep<11>2014 16:50 Oct 14, 2021 Jkt 256001 fulfill this requirement.56 Ultimately, the Commission is unconvinced by the commenter’s arguments that Swiss law imposes trading relationship documentation requirements that are comparable to those under Exchange Act rule 15Fi–5. Therefore, for the reasons discussed above and in the proposed Order, the Commission is not making a positive substituted compliance determination in relation to trading relationship documentation. The commenter also requested that, as an alternative to a positive substituted compliance determination for trading relationship documentation generally, the Commission provide relief from the requirements of Exchange Act rule 15Fi–5(b)(5) 57 relating to disclosures for insured depository institutions and financial companies under the Dodd Frank Act.58 In support of its request the commenter noted that such relief would be consistent with the rule’s goal of ‘‘enhancing transparency and legal certainty regarding each party’s rights and obligations under the transaction.’’ 59 However, the commenter did not identify Swiss requirements that would require comparable disclosure of those rights and obligations or governing law under the transaction and, in fact, noted that because Swiss law subjects banks to a depositor protection scheme, no documentation is required.60 The commenter also posits that the Commission should grant relief to be consistent with its approach taken in other jurisdictions.61 However, in each of the jurisdictions cited by the commenter, comparable requirements were identified by the applicants to warrant a positive substituted compliance determination.62 A 56 See Swiss Firms’ Letter at 2 (stating that ‘‘in very limited instances, key terms may be documented in a confirmation shortly after an oral agreement’’). 57 17 CFR 240.15Fi–5(b)(5), Exchange Act rule 15Fi–5(b)(5). 58 The trading relationship documentation provisions of rule 15Fi–5(b)(5), 17 CFR 240.15Fi– 5(b)(5), require certain disclosures regarding the status of the SBS Entity or its counterparty as an insured depository institution or financial counterparty, and regarding the possible application of the insolvency regime set forth under Title II of the Dodd-Frank Act or the Federal Deposit Insurance Act. 59 See Swiss Firms’ Letter at 3 (quoting the Risk Mitigation Adopting Release, 85 FR at 6361). 60 See Swiss Firms’ Letter at 3. 61 See Swiss Firms’ Letter at 3–4 (citing to the French Substituted Compliance Order, 86 FR at 41623 n.136, German Substituted Compliance Order, 85 FR at 85690 n.36, and Spanish Substituted Compliance Notice and Proposed Order, 86 FR at 47674 n.66). 62 See French Substituted Compliance Order, 86 FR at 41623 n.136 (citing EMIR Margin RTS article 2); German Substituted Compliance Order, 85 FR at PO 00000 Frm 00054 Fmt 4703 Sfmt 4703 comparable disclosure requirement under Swiss law has not been identified in either the Swiss Application 63 or the commenter’s letter.64 As previously stated, in lieu of requiring requirement-by-requirement similarity, the Commission takes a holistic approach to assessing comparability analysis, encompassing all Swiss requirements that establish comparability with the applicable regulatory outcome.65 However, as neither the Swiss Application, nor the commenter, has identified an applicable regulation under Swiss law, the Commission is unable to determine comparability. Therefore, the Commission is not granting the commenter’s requested relief and is not making a positive substituted compliance determination specific to the requirements of Exchange Act rule 15Fi–5(b)(5). Dispute Reporting: The Commission did not receive comments on its preliminary view with respect to dispute resolution. For the reasons described in the proposed Order,66 the Commission continues to believe that Swiss dispute reporting requirements are not comparable to Exchange Act requirements and is not making a positive substituted compliance determination for them. Other Risk Control Requirements: Having not received any comments addressing them, the Commission continues to conclude that, taken as a whole, the internal risk management, trade acknowledgment and verification, portfolio reconciliation, and portfolio compression requirements under Swiss law subject Covered Entities to risk mitigation and documentation practices that are appropriate to the risks associated with their security-based swap businesses, and thus help to produce regulatory outcomes that are comparable to the outcomes associated with the relevant risk control requirements under the Exchange Act. Although the Commission recognizes that there are differences between the approaches taken by the relevant risk control requirements under the Exchange Act and relevant Swiss 85690 n.36 (citing EMIR Margin article 2 and EMIR Margin RTS article 2); Spanish Substituted Compliance Notice and Proposed Order, 86 FR at 47674 n.66 (citing EMIT Margin RTS). 63 See Swiss Application section II.1.c at 28–29 (stating that ‘‘because Swiss law subjects banks to a depositor protection scheme, documentation of the bank’s status as such is not required’’). 64 See Swiss Firms’ Letter at 3 (stating that ‘‘Swiss laws do not require the same disclosure [as Exchange Act rule 15Fi–5(b)(5)]’’). 65 See Swiss Substituted Compliance Notice and Proposed Order, 86 FR at 45775. 66 See id. at 45774–75. E:\FR\FM\15OCN1.SGM 15OCN1 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Notices requirements, the Commission continues to believe that those differences on balance should not preclude substituted compliance for these requirements, as the relevant Swiss requirements taken as a whole help to produce comparable regulatory outcomes. To help ensure the comparability of outcomes, substituted compliance for the relevant risk control requirements is subject to certain conditions. Substituted compliance for internal risk management, trade acknowledgment and verification, portfolio reconciliation, and portfolio compression requirements is conditioned on the Covered Entity being subject to, and complying with, relevant Swiss requirements.67 In connection with portfolio reconciliation requirements, the Order requires that Covered Entities not apply FinMIA article 108(b)’s exception for ‘‘small non-financial counterparties’’ as defined in FinMIA article 98. Requiring that Covered Entities not apply this exception helps ensures that the Swiss requirements for portfolio reconciliation are applied to Covered Entities in a manner comparable to the applicable Exchange Act requirements. In connection with portfolio compression requirements, the Order also requires that Covered Entities not apply the portion of FinMIA article 108(d) that excludes application of its requirements when there are fewer than 500 noncentrally cleared OTC derivatives transactions outstanding.68 Requiring that Covered Entities not apply this exclusion helps ensure that the Swiss requirements for portfolio compression are applied to Covered Entities in a manner comparable to the applicable Exchange Act requirements. A Covered Entity that is unable to comply with an applicable condition—and thus is not eligible to use substituted compliance for the particular set of Exchange Act risk control requirements related to that condition—nevertheless may use substituted compliance for another set of Exchange Act requirements addressed in the Order if it complies with the conditions to the relevant parts of the Order. Under the Order, substituted compliance for the relevant risk control requirements (relating to internal risk management, trade acknowledgment and verification, portfolio reconciliation, and portfolio compression) is not subject to a condition that the Covered Entity apply substituted compliance for related 67 See 68 See paras. (b)(1) through (4) of the Order. para. (b)(4)(ii) of the Order. VerDate Sep<11>2014 16:50 Oct 14, 2021 Jkt 256001 recordkeeping requirements in Exchange Act rules 18a–5 and 18a–6. A Covered Entity that applies substituted compliance for one or more risk control requirements, but does not apply substituted compliance for the related recordkeeping requirements in Exchange Act rules 18a–5 and 18a–6, will remain subject to the relevant provisions of Exchange Act rules 18a–5 and 18a–6. Those rules require the Covered Entity to make and preserve records of its compliance with Exchange Act risk control requirements and of its security-based swap activities required or governed by those requirements. A Covered Entity that applies substituted compliance for a risk control requirement, but complies directly with related recordkeeping requirements in rules 18a–5 and 18a–6, therefore must make and preserve records of its compliance with the relevant conditions of the Order and of its security-based swap activities required or governed by those conditions and/or referenced in the relevant parts of rules 18a–5 and 18a–6. V. Substituted Compliance for Internal Supervision, Chief Compliance Officer and Additional Exchange Act Section 15F(j) Requirements A. Proposed Approach The Swiss Application requested substituted compliance in connection with requirements relating to: • Internal supervision—Diligent supervision is required pursuant to Exchange Act rule 15Fh–3(h),69 and Exchange Act section 15F(j)(5) requires conflict of interest systems and procedures. These provisions generally require that SBSEs establish, maintain and enforce supervisory policies and procedures that reasonably are designed to prevent violations of applicable law, and implement certain systems and procedures related to conflicts of interest.70 • Chief compliance officers—Chief compliance officer requirements are set out in Exchange Act section 15F(k) and Exchange Act rule 15Fk–1.71 These provisions in general require that SBSEs designate individuals with the responsibility and authority to establish, 69 17 CFR 240.15Fh–3(h). Swiss Application addresses Swiss provisions that address firms’ supervisory systems, responsible individuals and qualification requirements for supervisors, supervisory system policies and procedures; the chief compliance officer and the chief compliance officer’s reporting authority and job security, chief compliance officer policies and procedures, and chief compliance officer reports. See Swiss Application section II.3 at 67–109. 71 17 CFR 240.15Fk–1. 70 The PO 00000 Frm 00055 Fmt 4703 Sfmt 4703 57461 administer and review compliance policies and procedures, to resolve conflicts of interest, and to prepare and certify an annual compliance report to the Commission.72 • Additional Exchange Act section 15F(j) requirements—Additional requirements related to informationgathering pursuant to Exchange Act section 15F(j)(4)(A), and certain antitrust prohibitions specified by Exchange Act section 15F(j)(6).73 Taken as a whole, these internal supervision, chief compliance officer and additional Exchange Act section 15F(j) requirements help to promote SBSEs’ use of structures, processes and responsible personnel reasonably designed to promote compliance with applicable law, identify and cure instances of non-compliance and manage conflicts of interest. In proposing to provide conditional substituted compliance in connection with this part of the Swiss Application, the Commission preliminarily concluded that the relevant Swiss requirements in general would produce comparable regulatory outcomes by providing that Swiss SBSDs have structures and processes that reasonably are designed to promote compliance with applicable law and to identify and cure instances of non-compliance and manage conflicts of interest. Substituted compliance under the proposed Order was to be conditioned in part on SBSDs being subject to and complying with specified Swiss provisions that in the aggregate produce regulatory outcomes that are comparable to those associated with those internal supervision, compliance and related requirements under the Exchange Act.74 Under the proposed Order, substituted compliance was to be subject to certain additional conditions to help ensure the comparability of regulatory outcomes. First, substituted compliance in connection with the 72 The Swiss Application discusses Swiss requirements that address compliance officers and their responsibilities, compliance officer appointment, removal and compensation, related conflict of interest provisions and compliancerelated reports. See Swiss Application section II.3.c at 90–109. 73 Section 15F(j)(4)(A) particularly requires firms to have systems and procedures to obtain necessary information to perform functions required under section 15F. The Swiss Application in turn discusses Swiss provisions generally addressing information gathering and disclosure. See Swiss Application Section II.2 at 33. Section 15F(j)(6) prohibits firms from adopting any process or taking any action that results in any unreasonable restraint of trade, or to impose any material anticompetitive burden on trading or clearing. The Swiss Application addresses Swiss antitrust requirements. See Swiss Application section II.3.b at 78. 74 See Swiss Substituted Compliance Notice and Proposed Order, 86 FR at 45775–76. E:\FR\FM\15OCN1.SGM 15OCN1 57462 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Notices internal supervision requirements would be conditioned on the Covered Entities complying with applicable Swiss supervisory and compliance provisions as if those provisions also require the Covered Entities to comply with applicable requirements under the Exchange Act and the other conditions of the Order.75 This condition was intended to reflect that, even with substituted compliance, Covered Entities would still directly be subject to a number of requirements under the Exchange Act and conditions of the Order that fall outside the ambit of Swiss internal supervision and compliance requirements.76 For similar reasons, the proposed Order conditioned substituted compliance in connection with the compliance report requirements under Exchange Act section 15F(k)(3) and Exchange Act rule 15Fk–1(c) on the Covered Entity annually providing the Commission with certain compliance reports required pursuant to FINMA Circular 2017/1 margins 78–81. Those reports must: (1) Be provided to the Commission at least annually and in the English language; (2) include a certification signed by the chief compliance officer or senior officer 77 of the Covered Entity that, to the best of the certifier’s knowledge and reasonable belief and under penalty of law, the report is accurate and complete in all material respects; (3) address the Covered Entity’s compliance with applicable requirements under the Exchange Act and other applicable conditions of the proposed Order in connection with requirements for which the Covered Entity is relying on the proposed Order; (4) be provided to the Commission no later than 15 days following the earlier of the submission of the report to the Covered Entity’s management body or the time the report 75 In other words, the proposed Order would require that the Covered Entity’s supervisory and compliance program cover the applicable requirements under the Exchange Act and other conditions of the Order. 76 See id. at 45776. These residual Exchange Act requirements could, for example, relate to requirements for which substituted compliance is not available, requirements for which the Order does not make a positive substituted compliance determination, security-based swap business for which the Covered Entity is unable to satisfy the conditions of the Order, and/or requirements or security-based swap business for which the Covered Entity decides not to use substituted compliance. The condition was designed to allow a Covered Entity to use their existing internal supervision and compliance frameworks to comply with the relevant Exchange Act requirements and Order conditions, rather than having to establish separate specialpurpose supervision and compliance frameworks. 77 See Exchange Act rule 15Fk–1(e)(2) (defining ‘‘senior officer’’ as ‘‘the chief executive officer or other equivalent officer’’). VerDate Sep<11>2014 16:50 Oct 14, 2021 Jkt 256001 is required to be submitted to the management body; and (5) together cover the entire period that the Covered Entity’s annual compliance report referenced in Exchange Act section 15F(k)(3) and Exchange Act rule 15Fk– 1(c) would be required to cover.78 The Commission preliminarily did not provide substituted compliance for Exchange Act antitrust provisions, based on the preliminary conclusion that allowing an alternative means of compliance would not lead to comparable regulatory outcomes.79 B. Commenter Views and Final Provisions The Commission received one comment addressing the internal supervision, chief compliance officer and additional Exchange Act section 15F(j) requirements section of the proposed Order 80 and other than modifying the order in response to the comment, is adopting it as proposed.81 The commenter stated that two Swiss provisions included in paragraph (c)(3) of the proposed Order, BO articles 14e and 14g, would not apply to Covered Entities.82 The commenter also stated that the other provisions cited in paragraph (c)(3), in particular BO article 12 and FINMA Circular 2017/1, were sufficient for a finding of comparability.83 With respect to BO article 14e, the Commission believes that the remaining provisions are duplicative and has therefore deleted the reference to BO article 14e.84 With respect to BO article 14g, however, the provisions cited do not clearly address conflicts of interest of associated persons, although the Swiss Application argues that those provisions do, in practice, lead to comparable outcomes.85 The Swiss Application, 78 See Swiss Substituted Compliance Notice and Proposed Order, 86 FR at 45776–77. The condition was designed to allow a Covered Entity to leverage the compliance reports that it must produce pursuant to Swiss requirements, by extending those reports to address compliance with the conditions to the proposed Order. In practice, a Covered Entity may satisfy this condition by identifying relevant Order conditions and reporting on the implementation and effectiveness of its controls with regard to compliance with those Order conditions. 79 See id. at 45777. 80 See Swiss Substituted Compliance Notice and Proposed Order, 86 FR at 45775–77. 81 See para. (c) of the Order. 82 See Letter from Colin Lloyd of Cleary Gottlieb Steen & Hamilton LLP on behalf of UBS AG and Credit Suisse AG to Vanessa Countryman, Secretary, Commission, dated October 6, 2021 (‘‘Swiss Firms’ Letter II’’). 83 Id. 84 See para. (c)(3) of the Order. 85 See Swiss Application section II.3.d at 96 and Swiss Firms’ Letter II. PO 00000 Frm 00056 Fmt 4703 Sfmt 4703 however, identified FinSA article 25,86 which addresses conflicts of interest to the same extent as article 14g, and is applicable to the Covered Entities, but only within Switzerland. The Commission believes it is therefore necessary to make two changes to address the deletion of BO article 14g. First, the Commission has replaced BO article 14g with FinSA article 25 in paragraph (c)(3), but compliance with FinSA article 25 is only required when it is by its terms applicable (within Switzerland).87 In addition, consistent with the Swiss Application,88 the Commission has included a condition to BO article 12 requiring that article 12(2) be applied in a manner to address the relevant conflicts of interest.89 Consistent with the proposed Order, substituted compliance in connection with internal supervision further is conditioned on the Covered Entity being subject to and complying with the applicable Swiss supervisory and compliance provisions listed in paragraph (c)(3) of the Order, as if those provisions also require SBSDs to comply with applicable requirements under the Exchange Act and the other applicable conditions to the Order.90 Substituted compliance in connection with the chief compliance officer requirements further is conditioned on the compliance reports provided to the Commission addressing the SBSD’s compliance with other applicable conditions of the Order.91 A Covered Entity that is unable to comply with an applicable condition—and thus is not eligible to use substituted compliance for the Exchange Act internal supervision and/or chief compliance officer requirements related to that condition—nevertheless may use substituted compliance for another set of Exchange Act requirements addressed in the Order if it complies with the conditions to the relevant parts of the Order. Under the Order, substituted compliance for internal supervision and chief compliance officer requirements is not subject to a condition that the Covered Entity apply substituted compliance for related recordkeeping requirements in Exchange Act rules 18a–5 and 18a–6. A Covered Entity that 86 See Swiss Application section II.3.d at 96. para. (c)(3) of the Order. 88 See Swiss Application section II.3.d at 97–98. 89 See para. (c)(3) of the Order. 90 See para. (c)(4) of the Order. In other words, a Covered Entity’s reliance on substituted compliance under para. (c)(4) requires that the Covered Entity’s supervisory and compliance programs cover the applicable provisions under the Exchange Act and other conditions of the Order. 91 See para. (c)(2)(ii) of the Order. 87 See E:\FR\FM\15OCN1.SGM 15OCN1 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Notices applies substituted compliance for internal supervision and/or chief compliance officer requirements, but does not apply substituted compliance for the related recordkeeping requirements in Exchange Act rules 18a–5 and 18a–6, will remain subject to the relevant provisions of Exchange Act rules 18a–5 and 18a–6. Those rules require the Covered Entity to make and preserve records of its compliance with Exchange Act internal supervision and chief compliance officer requirements and of its security-based swap activities required or governed by those requirements. A Covered Entity that applies substituted compliance for internal supervision and/or chief compliance officer requirements, but complies directly with related recordkeeping requirements in rules 18a–5 and 18a–6, therefore must make and preserve records of its compliance with the relevant conditions of the Order and of its security-based swap activities required or governed by those conditions and/or referenced in the relevant parts of rules 18a–5 and 18a– 6. Finally, the substituted compliance Order does not extend to antitrust provisions under the Exchange Act, as the Commission continues to believe that allowing an alternative means of compliance would not lead to outcomes comparable to the Exchange Act.92 VI. Substituted Compliance for Recordkeeping, Reporting, and Notification Requirements A. Proposed Approach The Swiss Application in part requested substituted compliance for requirements applicable to SBS Entities under the Exchange Act relating to: • Record Making—Exchange Act rule 18a–5 requires prescribed records to be made and kept current.93 • Record Preservation—Exchange Act rule 18a–6 requires preservation of records.94 • Reporting—Exchange Act rule 18a– 7 requires certain reports.95 92 See Swiss Substituted Compliance Notice and Proposed Order, 86 FR at 45777. 93 See 17 CFR 240.18a–5. The Swiss Application discusses Swiss requirements that address firms’ record creation obligations related to matters such as financial condition, operations, transactions, counterparties, and their property, personnel, and business conduct. See Swiss Application section II.2.a at 33–47. 94 See 17 CFR 240.18a–6. The Swiss Application discusses Swiss requirements that address firms’ record preservation obligations related to records that firms are required to create, as well as additional records such as records of communications. See Swiss Application section II.2.b at 48–61. 95 See 17 CFR 240.18a–7. The Swiss Application discusses Swiss requirements that address firms’ VerDate Sep<11>2014 16:50 Oct 14, 2021 Jkt 256001 • Notification—Exchange Act rule 18a–8 requires notification to the Commission when certain financial or operational problems occur.96 • Daily Trading Records—Exchange Act section 15F(g) requires SBS Entities to maintain daily trading records.97 Taken as a whole, the recordkeeping, reporting, and notification requirements that apply to SBS Entities are designed to promote the prudent operation of the firm’s security-based swap activities, assist the Commission in conducting compliance examinations of those activities, and alert the Commission to potential financial or operational problems that could impact the firm and its customers.98 B. Commenter Views and Final Provisions 1. General Considerations In proposing to provide conditional substituted compliance in connection with this part of the Swiss Application, the Commission preliminarily concluded that the relevant Swiss requirements, subject to conditions and limitations, would produce regulatory outcomes that are comparable to the outcomes associated with the vast majority of the recordkeeping, reporting, and notification requirements under the Exchange Act applicable to prudentially regulated SBS Entities pursuant to Exchange Act rules 18a–5, 18a–6, 18a– 7, and 18a–8 and Exchange Act section 15F(g) (collectively, the ‘‘recordkeeping, reporting, and notification requirements’’).99 Substituted compliance for the recordkeeping, obligations to make certain reports. See Swiss Application section II.2.c at 62–64. 96 See 17 CFR 240.18a–8. The Swiss Application discusses Swiss requirements that address firms’ obligations to make certain notifications. See Swiss Application section II.2.c at 64–66. 97 See 15 U.S.C. 78o–10(g). The Swiss Application discusses Swiss requirements that address firms’ record preservation obligations related to records that firms are required to create, as well as additional records such as records of communications. See Swiss Application section II.2.b at 50–52. 98 Rule 3a71–6 sets forth additional analytic considerations in connection with substituted compliance for the Commission’s recordkeeping, reporting, and notification requirements. In particular, Exchange Act rule 3a71–6(d)(6) provides that the Commission intends to consider (in addition to any conditions imposed) ‘‘whether the foreign financial regulatory system’s required records and reports, the timeframes for recording or reporting information, the accounting standards governing the records and reports, and the required format of the records and reports’’ are comparable to applicable provisions under the Exchange Act, and whether the foreign provisions ‘‘would permit the Commission to examine and inspect regulated firms’ compliance with the applicable securities laws.’’ 99 See Swiss Substituted Compliance Notice and Proposed Order, 86 FR at 45777. PO 00000 Frm 00057 Fmt 4703 Sfmt 4703 57463 reporting, and notification requirements accordingly is conditioned on Covered Entities being subject to and complying with the Swiss provisions that in the aggregate establish a framework that produces outcomes comparable to those associated with the analogous recordkeeping, reporting, and notification requirements under the Exchange Act.100 The proposed structure of the substituted compliance determinations with respect to the recordkeeping, reporting, and notification requirements would have provided Covered Entities with greater flexibility to select distinct requirements within the broader rules for which they want to apply substituted compliance.101 This would not preclude a Covered Entity from applying substituted compliance for the entire rule (subject to conditions and limitations). However, it would permit the Covered Entity to apply substituted compliance with respect to certain requirements of a given rule and to comply directly with the remaining requirements. This more granular approach to the recordkeeping, reporting, and notification rules was intended to permit Covered Entities to leverage existing recordkeeping and reporting systems that are designed to comply with the broker-dealer recordkeeping and reporting requirements on which the recordkeeping, reporting, and notification requirements applicable to SBS Entities are based. For example, it may be more efficient for a Covered Entity to comply with certain Exchange Act requirements within a given recordkeeping, reporting, or notification rule (rather than apply substituted compliance) because it can utilize systems that its affiliated broker-dealer has implemented to comply with them. This proposed approach was consistent with the approach taken by the Commission in the French and UK Orders.102 As applied to Exchange Act rules 18a–5 and 18a–6, this approach of providing greater flexibility resulted in preliminary substituted compliance determinations with respect to the different categories of records these 100 See paras. (d)(1)(i)(A), (d)(1)(i)(B), (d)(1)(i)(C), (d)(1)(i)(D), (d)(1)(i)(E), (d)(1)(i)(F)(1), (d)(1)(i)(G), (d)(1)(i)(H), (d)(1)(i)(I)(1), (d)(1)(i)(J)(1), (d)(1)(i)(K)(1), (d)(2)(i)(A), (d)(2)(i)(B), (d)(2)(i)(C), (d)(2)(i)(D), (d)(2)(i)(E), (d)(2)(i)(F)(1), (d)(2)(i)(G)(1), (d)(2)(i)(H), (d)(2)(i)(I), (d)(2)(i)(J), (d)(2)(i)(K)(1), (d)(2)(i)(L), (d)(2)(i)(M), (d)(3)(i), (d)(3)(i)(B), (d)(4)(i)(A), (d)(4)(i)(B), and (d)(5) of the Order. 101 See Swiss Substituted Compliance Notice and Proposed Order, 86 FR at 45777–78. 102 See French Substituted Compliance Order, 86 FR at 41649; UK Substituted Compliance Order, 86 FR at 43360. E:\FR\FM\15OCN1.SGM 15OCN1 57464 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Notices rules require SBS Entities to make, keep current, and/or preserve.103 The objective of these rules—taken as a whole—is to assist the Commission in monitoring and examining for compliance with substantive Exchange Act requirements applicable to SBS Entities (e.g., business conduct requirements) as well as to promote the prudent operation of these firms.104 The Commission stated a preliminary belief that the comparable Swiss recordkeeping rules achieve these outcomes with respect to compliance with substantive Swiss requirements for which preliminary positive substituted compliance determinations were being made (e.g., the preliminary positive substituted compliance determinations with respect to the Exchange Act business conduct requirements).105 At the same time, the recordkeeping rules address different categories of records through distinct requirements within the rules. Each requirement with respect to a specific category of records (e.g., paragraph (b)(2) of Exchange Act rule 18a–5 addressing ledger accounts) can be viewed in isolation as a distinct recordkeeping rule. Therefore, the Commission made preliminary substituted compliance determinations at this level of Exchange Act rules 18a– 5 and 18a–6.106 The Commission did not receive comment on this granular approach and is adopting it as proposed.107 Second, the Commission did not make a preliminary positive substituted compliance determination with respect to a discrete provision of the recordkeeping, reporting, and notification requirements if it was fully or partially linked to a substantive Exchange Act requirement for which substituted compliance was not available or for which a preliminary positive substituted compliance determination was not being made.108 In particular, a preliminary positive substituted compliance determination was not made, in full or in part, for recordkeeping, reporting, or notification requirements linked to the following Exchange Act rules for which substituted compliance is not available or a preliminary positive substituted 103 See Swiss Substituted Compliance Notice and Proposed Order, 86 FR at 45778. 104 See, e.g., Exchange Act Release No. 71958 (Apr. 17, 2014), 79 FR 25194, 25199–200 (May 2, 2014). 105 See Swiss Substituted Compliance Notice and Proposed Order, 86 FR at 45778. 106 See Swiss Substituted Compliance Notice and Proposed Order, 86 FR at 45778. 107 See paras. (d)(1)(i) and (d)(2)(ii) of the Order. 108 See Swiss Substituted Compliance Notice and Proposed Order, 86 FR at 45778 (discussing this limitation). VerDate Sep<11>2014 16:50 Oct 14, 2021 Jkt 256001 compliance determination was not made: (1) Exchange Act rule 15Fh–4; (2) Exchange Act rule 15Fh–5; (3) Exchange Act rule 15Fh–6; (4) Exchange Act rule 18a–4; (5) Regulation SBSR; (6) Form SBSE and its variations; (7) Exchange Act rule 15Fh–1; (8) Exchange Act rule 15Fh–2; and (9) Exchange Act rule 15Fi–5. This proposed approach was consistent with the approach taken by the Commission in the French and UK Orders.109 The Commission did not receive comment on these limitations and the Order includes them.110 Third, the Commission conditioned substituted compliance with discrete provisions of the recordkeeping, reporting, and notification requirements that were fully or partially linked to a substantive Exchange Act requirement for which substituted compliance was available on the Covered Entity applying substituted compliance with respect to the linked Exchange Act requirement.111 In particular, substituted compliance for a provision of the recordkeeping, reporting, and notification requirements that is linked to the following Exchange Act rules was conditioned on the SBS Entity applying substituted compliance to the linked substantive Exchange Act rule: (1) Exchange Act rule 15Fh–3(h); (2) Exchange Act rule 15Fi–2; (3) Exchange Act rule 15Fi–3; (4) Exchange Act rule 15Fi–4; and (5) Exchange Act rule 15Fk–1. The Commission did not receive comment on these conditions and the Order includes them.112 Fourth, the Commission conditioned substituted compliance with Exchange Act rule 18a–7 on Covered Entities filing periodic unaudited financial and operational information with the Commission or its designee in the manner and format required by Commission rule or order.113 The Commission did not receive comment on this condition and the Order includes it.114 Fifth, the proposed Order conditioned substituted compliance with Exchange Act rule 18a–8 on Covered entities simultaneously sending a copy of any notice required to be sent by Swiss law to the Commission in the manner specified on the Commission’s website 109 See French Substituted Compliance Order, 86 FR at 41650; UK Substituted Compliance Order, 86 FR at 45778. 110 See para. (d) of the Order. 111 See Swiss Substituted Compliance Notice and Proposed Order, 86 FR at 18395 (discussing this condition). 112 See para. (d)(3) of the Order. 113 See Swiss Substituted Compliance Notice and Proposed Order, 86 FR at 45782 (discussing this condition). 114 See para. (d)(3) of the Order. PO 00000 Frm 00058 Fmt 4703 Sfmt 4703 and including with the transmission the contact information of an individual who can provide further information about the matter that is the subject of the notice.115 The Commission did not receive comment on these conditions and the Order includes them.116 Sixth, the proposed Order included a condition that Covered Entities must promptly furnish to a representative of the Commission upon request an English translation of any record, report, or notification of the Covered Entity that is required to be made, preserved, filed, or subject to examination pursuant to Exchange Act section 15F of this Order.117 The Commission did not receive a comment on this condition and the Order includes it.118 2. Citations to Swiss Law The Commission received comment recommending changes to the proposed Order to refine the scope of Swiss law provisions that would operate as conditions to substituted compliance.119 The Commission staff reviewed each of the Swiss law citations that the commenter recommended adding or removing from the Order for relevance to the comparable Exchange Act requirement while also keeping in mind that each Swiss law citation was included in the Swiss Application intentionally. The Commission’s conclusion and reasoning with respect to the commenter’s recommendations are discussed in further detail below. First, the commenter recommended replacing references to FMIO article 38 with FinMIA article 38 in paragraphs (d)(1)(i)(E) and (d)(1)(i)(G) of the Order, because FinMIA article 38 covers recordkeeping duties of Covered Entities while FMIO article 38 is a provision that applies to organized trading facilities. The Commission agrees with the commenter’s reasoning and is therefore replacing references to FMIO article 38 with FinMIA article 38 in paragraphs (d)(1)(i)(E) and (d)(1)(i)(G) of the Order.120 Second, the commenter recommended deleting from paragraphs (d)(1)(i)(H) and (d)(2)(i)(H) of the Order references to CO article 330a, which provides for an employee’s right to obtain a letter of 115 See Swiss Substituted Compliance Notice and Proposed Order, 86 FR at 45782 (discussing this condition). 116 See para. (d)(4)(ii)(A) of the Order. 117 See Swiss Substituted Compliance Notice and Proposed Order, 86 FR at 45784 (discussing this condition). 118 See para. (d)(7) of the Order. 119 See Swiss Firms’ Letter at Annex. 120 Compare paras. (d)(1)(i)(E) and (d)(1)(i)(G) of the Swiss Substituted Compliance Notice and Proposed Order, with paras. (d)(1)(i)(E) and (d)(1)(i)(G) of the Order. E:\FR\FM\15OCN1.SGM 15OCN1 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Notices recommendation, reasoning that this Swiss law provision does not directly apply to records, and that this provision only concerns rights arising out of employment relationships under Swiss law and is not applicable outside of Switzerland. Even though CO article 330a is not a direct recordkeeping requirement, in practice it requires Swiss firms to maintain employment records that are relevant to Exchange Act rules 18a–5(b)(8) and 18a–6(d)(1), so the Commission is not removing references to this requirement from the Order’s list of Swiss requirements comparable to Exchange Act rules 18a– 5(b)(8) and 18a–6(d)(1).121 Third, the commenter recommended deleting from paragraph (d)(2)(i)(G)(1) of the Order references to CO article 686, which requires firms to preserve a register of registered shares for ten years, reasoning that this Swiss law provision only applies to shares of companies incorporated in Switzerland. The Commission expects the firms relying on the Order to be incorporated in Switzerland, so the Commission is not removing references to this requirement from the Order’s list of Swiss requirements comparable to Exchange Act rules 18a–6(c).122 Fourth, the commenter recommended replacing references to FINMA Circular 2008/21 margin 131 with FINMA Circular 2008/21 margin 132 in paragraph (d)(2)(i)(I) of the Order, because the Swiss Application inadvertently cited to a repealed provision of Swiss law. The Commission agrees with the commenter’s reasoning and is therefore replacing FINMA Circular 2008/21 margin 131 with FINMA Circular 2008/ 21 margin 132 in paragraph (d)(2)(i)(I) of the Order.123 VII. Supervisory and Enforcement Considerations A. Proposed Approach Exchange Act rule 3a71–6(a)(2)(i) provides that the Commission’s assessments regarding the comparability of foreign requirements in part should take into account ‘‘the effectiveness of the supervisory program administered, and the enforcement authority exercised’’ by the foreign financial regulatory authority. This provision is 121 Compare paras. (d)(1)(i)(H) and (d)(2)(i)(H) of the Swiss Substituted Compliance Notice and Proposed Order, with paras. (d)(1)(i)(H) and (d)(2)(i)(H) of the Order. 122 Compare para. (d)(2)(i)(G)(1) of the Swiss Substituted Compliance Notice and Proposed Order, with para. (d)(2)(i)(G)(1) of the Order. 123 Compare para. (d)(2)(i)(I) of the Swiss Substituted Compliance Notice and Proposed Order, with para. (d)(2)(i)(I) of the Order. VerDate Sep<11>2014 16:50 Oct 14, 2021 Jkt 256001 intended to help ensure that substituted compliance is not predicated on rules that appear high-quality on paper if market participants in practice are allowed to fall short of their obligations, while also recognizing that differences among supervisory and enforcement regimes should not be assumed to reflect flaws in one regime or another. The Swiss Application accordingly included information regarding the supervisory and enforcement framework applicable to derivatives markets and market participants in Switzerland. In proposing to grant substituted compliance in connection with the Swiss Application, the Commission preliminarily concluded that the relevant supervisory and enforcement considerations were consistent with substituted compliance. That preliminary conclusion took into account information regarding FINMAs practices supervising Covered Firms located in Switzerland, as well as their enforcement-related authority and practices.124 B. Commenter Views and Final Provisions Commenters did not address the Commission’s preliminary conclusions regarding supervisory and enforcement considerations, and the Commission continues to conclude that the relevant supervisory and enforcement considerations in Switzerland are consistent with substituted compliance. In particular, based on the available information regarding FINMA’s authority and practices to oversee market participants’ compliance with applicable requirements and to take action in the event of violations, the Commission remains of the view that, consistent with rule 3a71–6, comparability determinations reflect Swiss requirements as they apply in practice. To be clear, the supervisory and enforcement considerations addressed by rule 3a71–6 do not mandate that the Commission make judgments regarding the comparative merits of U.S. and foreign supervisory and enforcement frameworks, or to require specific findings regarding the supervisory and enforcement effectiveness of a foreign regime. The rule 3a71–6 considerations regarding supervisory and enforcement effectiveness instead address whether comparability analyses related to substituted compliance reflect requirements that market participants must follow, and for which market participants are subject to enforcement 124 See Swiss Substituted Compliance Notice and Proposed Order, 86 FR at 45784–85. PO 00000 Frm 00059 Fmt 4703 Sfmt 4703 57465 consequences in the event of violations. Those considerations are satisfied here. VIII. Conclusion It is hereby determined and ordered, pursuant to rule 3a71–6 under the Exchange Act, that a Covered Entity (as defined in paragraph (e)(1) of this Order) may satisfy the requirements under the Exchange Act that are addressed in paragraphs (b) through (d) of this Order so long as the Covered Entity is subject to and complies with relevant requirements of the Swiss Confederation and with the conditions to this Order, as amended or superseded from time to time. (a) General Conditions This Order is subject to the following general conditions, in addition to the conditions specified in paragraphs (b) through (d): (1) Security-based swaps and transactions as ‘‘derivatives’’ or ‘‘derivative transactions.’’ For each condition in paragraphs (b) through (d) of this Order that requires the application of, and the Covered Entity’s compliance with, provisions of FinMIA and FMIO, the relevant security-based swaps and security-based swap transactions are ‘‘derivatives’’ and/or ‘‘derivative transactions’’ for purposes of FinMIA article 2(c), or otherwise are described by the relevant language of that provision. (2) ‘‘Counterparty’’ status. For each condition in paragraph (b) through (d) of this Order that requires the application of, and the Covered Entity’s compliance with, the provisions of FinMIA and FMIO, the Covered Entity complies with the applicable conditions of the Order regardless of whether the Covered Entity’s counterparty is a ‘‘counterparty’’ for purposes of FinMIA article 93, or otherwise is described by the relevant language of that provision. (3) Counterparty’s status as ‘‘company.’’ For each condition in paragraph (b) through (d) of this Order that requires the application of, and the Covered Entity’s compliance with, the provisions of FMIO, the Covered Entity complies with the applicable conditions of the Order regardless of whether a Covered Entity’s counterparty is a ‘‘company’’ for purposes of FMIO article 77, or otherwise is described by the relevant language of that provision. (4) Covered Entity as ‘‘bank.’’ For each condition in paragraph (b) through (d) of this Order that requires the application of, and the Covered Entity’s compliance with, the provisions of the BA and BO and/or other Swiss requirements adopted pursuant to those provisions, the Covered Entity is a ‘‘bank’’ for E:\FR\FM\15OCN1.SGM 15OCN1 57466 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Notices purposes of BA article 1a, or otherwise is described by the relevant language of that provision. (5) Covered Entity as ‘‘systemically important.’’ For each condition in paragraph (b) through (d) of this Order that requires the application of, and the Covered Entity’s compliance with, the provisions of the FINMA Circular 2017/ 1, the Covered Entity is ‘‘systemically important’’ for purposes of BA article 8(3) and article 9, or otherwise are described by the relevant language of that provision. (6) Covered Entity as ‘‘category 1.’’ For each condition in paragraph (b) through (d) of this Order that requires the application of, and the Covered Entity’s compliance with, the provisions of FINMA Circular 2017/1, the Covered Entity is supervised as ‘‘category 1,’’ as defined in BO articles 2(2) and 2(3) and BO Annex 3, or otherwise is described by the relevant language of those provisions. (7) ‘‘Institution-specific approach’’ to operational risk quantification. For each condition in paragraphs (b) through (d) of this Order that requires the application of, and the Covered Entity’s compliance with, the provisions of FINMA Circular 2008/21 margins 45– 107, the Covered Entity applies the institution-specific approach, as defined in CAO article 94, to quantifying capital requirements for operational risk, as approved by FINMA. (8) Memorandum of Understanding with FINMA. The Commission and FINMA have a supervisory and enforcement memorandum of understanding and/or other arrangement addressing cooperation with respect to this Order at the time the Covered Entity complies with the relevant requirements under the Exchange Act via compliance with one or more provisions of this Order. (9) Notice to Commission. A Covered Entity relying on this Order must provide notice of its intent to rely on this Order by notifying the Commission in writing. Such notice must be sent to an email address provided on the Commission’s website. The notice must include the contact information of an individual who can provide further information about the matter that is the subject of the notice. The notice must identify each specific substituted compliance determination within paragraphs (b) through (d) of the Order for which the Covered Entity intends to apply substituted compliance. A Covered Entity must promptly provide an amended notice if it modifies its reliance on the substituted compliance determinations in this Order. VerDate Sep<11>2014 16:50 Oct 14, 2021 Jkt 256001 (10) Notification Requirements Related to Changes in Capital. A Covered Entity that is prudentially regulated relying on this Order must apply substituted compliance with respect to the requirements of Exchange Act rule 18a–8(c) and the requirements of Exchange Act rule 18a–8(h) as applied to Exchange Act rule 18a–8(c). (b) Substituted Compliance in Connection With Risk Control Requirements This Order extends to the following provisions related to risk control: (1) Internal risk management. The requirements of Exchange Act section 15F(j)(2) and relevant aspects of Exchange Act rule 15Fh–3(h)(2)(iii)(I), provided that the Covered Entity is subject to and complies with the requirements of: BO article 12; FINMA Circular 2017/1 margins 9–14, 31–49, 52–76, 82–97; and FINMA Circular 2008/21 margins 45, 54–63, 65–68, 117– 138. (2) Trade acknowledgement and verification. The requirements of Exchange Act rule 15Fi–2, provided that the Covered Entity is subject to and complies with the requirements of FinMIA articles 108(a) and (c); and FMIO articles 95, 97, and 113(1). (3) Portfolio reconciliation. The requirements of Exchange Act rule 15Fi–3, other than paragraph (c) to that rule, provided that: (i) The Covered Entity is subject to and complies with the requirements of FINMASA article 29; FinMIA article 108(b) and (c); and FMIO articles 96, 97 and 113(1)(d); (ii) The Covered Entity does not apply FinMIA article 108(b)’s exception for ‘‘small non-financial counterparties’’ as defined in FinMIA article 98. (4) Portfolio compression. The requirements of Exchange Act rule 15Fi–4, provided that: (i) The Covered Entity is subject to and complies with the requirements of FinMIA article 108(d); and FMIO articles 98 and 113(1)(d); and (ii) The Covered Entity does not apply the portion of FinMIA article 108(d) that excludes application of the requirement when there are fewer than 500 noncentrally cleared OTC derivatives transactions outstanding. (c) Substituted Compliance in Connection With Internal Supervision and Compliance Requirements and Certain Exchange Act Section 15F(j) Requirements This Order extends to the following provisions related to internal supervision and compliance and PO 00000 Frm 00060 Fmt 4703 Sfmt 4703 Exchange Act section 15F(j) requirements: (1) Internal supervision. The requirements of Exchange Act rule 15Fh–3(h) and Exchange Act sections 15F(j)(4)(A) and (j)(5), provided that: (i) The Covered Entity is subject to and complies with the requirements identified in paragraph (c)(3) of this Order; and (ii) This paragraph (c) does not extend to the requirements of paragraph (h)(2)(iii)(I) to rule 15Fh–3 to the extent those requirements pertain to compliance with Exchange Act sections 15F(j)(2), (j)(3), (j)(4)(B) and (j)(6), or to the general and supporting provisions of paragraph (h) to rule 15Fh–3 in connection with those Exchange Act sections. (2) Chief compliance officers. The requirements of Exchange Act section 15F(k) and Exchange Act rule 15Fk–1, provided that: (i) The Covered Entity complies with the requirements identified in paragraph (c)(3) of this Order; (ii) All reports required pursuant to FINMA Circular 2017/1 margins 78–81 must also: (A) Be provided to the Commission at least annually, and in the English language; (B) Include a certification signed by the chief compliance officer or senior officer (as defined in Exchange Act rule 15Fk–1(e)(2)) of the Covered Entity that, to the best of the certifier’s knowledge and reasonable belief and under penalty of law, the report is accurate and complete in all material respects; (C) Address the firm’s compliance with: (i) Applicable requirements under the Exchange Act; and (ii) The other applicable conditions to this Order in connection with requirements for which the Covered Entity is relying on this Order; (D) Be provided to the Commission no later than 15 days following the earlier of: (i) The submission of the report to the Covered Entity’s management body; or (ii) The time the report is required to be submitted to the management body; and (E) Together cover the entire period that the Covered Entity’s annual compliance report referenced in Exchange Act section 15F(k)(3) and Exchange Act rule 15Fk–1(c) would be required to cover. (3) Applicable supervisory and compliance requirements. Paragraphs (c)(1) and (c)(2) are conditioned on the Covered Entity being subject to and complying with the following requirements: BA articles 3(2)(c) and 3f; E:\FR\FM\15OCN1.SGM 15OCN1 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Notices BO article 12 (provided that the application of BO article 12(2) includes procedures reasonably designed to address conflicts of interest that may be present with respect to associated persons being supervised); FINMA Circular 2017/1 articles 9–97; FINMA Circular 2008/21 margins 54–62, 65–68, 121–122, and 128–136.5; FINMA Circular 2013/8 margins 45–61, 64; FINMA Circular 2010/1 margins 16–74; FINMA Circular 2018/3 margins 14–35; and (where applicable) FinSA article 25. (4) Additional condition to paragraph (c)(1). Paragraph (c)(1) further is conditioned on the requirement that the Covered Entity complies with the provisions specified in paragraph (c)(3) as if those provisions also require compliance with: (i) Applicable requirements under the Exchange Act; and (ii) The other applicable conditions to this Order in connection with requirements for which the Covered Entity is relying on this Order. (d) Substituted Compliance in Connection With Recordkeeping, Reporting, and Notification Requirements This Order extends to the following provisions that apply to a Covered Entity related to recordkeeping, reporting, and notification: (1)(i) Make and keep current certain records. The requirements of the following provisions of Exchange Act rule 18a–5, provided that the Covered Entity complies with the relevant conditions in this paragraph (d)(1)(i) and with the applicable conditions in paragraph (d)(1)(ii): (A) The requirements of Exchange Act rule 18a–5(b)(1), provided that the Covered Entity is subject to and complies with the requirements of FMIO–FINMA article 1; FinMIA articles 104 and 106; FMIO annex 2; CO article 958f; (B) The requirements of Exchange Act rule 18a–5(b)(2), provided that the Covered Entity is subject to and complies with the requirements of CO article 958f; AccO article 1; FinMIA article 106; (C) The requirements of Exchange Act rule 18a–5(b)(3), provided that the Covered Entity is subject to and complies with the requirements of CO article 958f; FinMIA articles 104 and 106; FMIO annex 2; (D) The requirements of Exchange Act rule 18a–5(b)(4), provided that the Covered Entity is subject to and complies with the requirements of FinMIA article 38; FMIO article 36; FinIA article 50; FMIO–FINMA article 1; CO article 958f; VerDate Sep<11>2014 16:50 Oct 14, 2021 Jkt 256001 (E) The requirements of Exchange Act rule 18a–5(b)(5), provided that the Covered Entity is subject to and complies with the requirements of FinMIA article 38; FinIA article 50; FMIO–FINMA article 1; CO article 958f; (F) The requirements of Exchange Act rules 18a–5(b)(6) and (b)(11), provided that: (1) The Covered Entity is subject to and complies with the requirements of FinMIA articles 106 and 108(a); FMIO article 95; CO article 958f; and (2) The Covered Entity applies substituted compliance for the requirements of Exchange Act rule 15Fi–2 pursuant to this Order; (G) The requirements of Exchange Act rule 18a–5(b)(7), provided that the Covered Entity is subject to and complies with the requirements of FinMIA article 38; FinIA article 50; FMIO–FINMA article 1; FMIO annex 2; FinMIA articles 104 and 106; AMLA article 3; CO article 958f; (H) The requirements of Exchange Act rule 18a–5(b)(8), provided that the Covered Entity is subject to and complies with the requirements of CO article 958f; BA article 3; BO article 12; CO article 330a; FINMA Circular 2008/ 21, Annex 3, margins 30–33; (I) The requirements of Exchange Act rule 18a–5(b)(13), regarding one or more provisions of Exchange Act rules 15Fh– 3 or 15Fk–1 for which substituted compliance is available under this Order, provided that: (1) The Covered Entity is subject to and complies with the requirements of FINMA Circular 2017/1; BA article 3; CO article 958f, in each case with respect to the relevant security-based swap or activity; (2) With respect to the portion of Exchange Act rule 18a–5(b)(13) that relates to one or more provisions of Exchange Act rule 15Fh–3 for which substituted compliance is available under this Order, the Covered Entity applies substituted compliance for such business conduct standard(s) of Exchange Act rule 15Fh–3 pursuant to this Order, as applicable, with respect to the relevant security-based swap or activity; and (3) With respect to the portion of Exchange Act rule 18a–5(b)(13) that relates to Exchange Act rule 15Fk–1, the Covered Entity applies substituted compliance for Exchange Act section 15F(k) and Exchange Act rule 15Fk–1 pursuant to this Order; (J) The requirements of Exchange Act rule 18a–5(b)(14)(i) and (ii), provided that: (1) The Covered Entity is subject to and complies with the requirements of PO 00000 Frm 00061 Fmt 4703 Sfmt 4703 57467 FinMIA articles 104 and 106; CO article 958f; and (2) The Covered Entity applies substituted compliance for Exchange Act rule 15Fi–3 pursuant to this Order; and (K) The requirements of Exchange Act rule 18a–5(b)(14)(iii), provided that: (1) The Covered Entity is subject to and complies with the requirements of FinMIA articles 104 and 106; CO article 958f; and (2) The Covered Entity applies substituted compliance for Exchange Act rule 15Fi–4 pursuant to this Order. (ii) Paragraph (d)(1)(i) is subject to the following further conditions: (A) Paragraphs (d)(1)(i)(A) through (C) and (G) are subject to the condition that the Covered Entity preserves all of the data elements necessary to create the records required by the applicable Exchange Act rules cited in such paragraphs and upon request furnishes promptly to representatives of the Commission the records required by those rules; (B) A Covered Entity may apply the substituted compliance determination in paragraph (d)(1)(i)(I) to records of compliance with Exchange Act rule 15Fh–3(h) in respect of one or more security-based swaps or activities related to security-based swaps; and (C) This Order does not extend to the requirements of Exchange Act rule 18a– 5(b)(9), (b)(10), or (b)(12). (2)(i) Preserve certain records. The requirements of the following provisions of Exchange Act rule 18a–6, provided that the Covered Entity complies with the relevant conditions in this paragraph (d)(2)(i) and with the applicable conditions in paragraph (d)(2)(ii): (A) The requirements of Exchange Act rule 18a–6(a)(2), provided that the Covered Entity is subject to and complies with the requirements of FinMIA article 106; CO article 958f; FMIO–FINMA article 1(4); AccO article 3; FINMA Circular 2008/4 Marg. 16; (B) The requirements of Exchange Act rule 18a–6(b)(2)(i), provided that the Covered Entity is subject to and complies with the requirements of FinMIA article 106; CO article 958f; FMIO–FINMA article 1(4); AccO article 3; FINMA Circular 2008/4 Marg. 16; (C) The requirements of Exchange Act rule 18a–6(b)(2)(ii), provided that the Covered Entity is subject to and complies with the requirements of CO article 958f; FINMA Circular 2013/8 Marg. 60 and Marg. 61; (D) The requirements of Exchange Act rule 18a–6(b)(2)(iii), provided that the Covered Entity is subject to and complies with the requirements of CO E:\FR\FM\15OCN1.SGM 15OCN1 57468 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Notices article 958f; AMLA article 7(3); AMLO– FINMA article 5(1); (E) The requirements of Exchange Act rule 18a–6(b)(2)(iv), provided that the Covered Entity is subject to and complies with the requirements of CO article 958f; FINMA Circular 2013/8 Marg. 60 and Marg. 61; (F) The requirements of Exchange Act rule 18a–6(b)(2)(vii), regarding one or more provisions of Exchange Act rules 15Fh–3 or 15Fk–1 for which substituted compliance is available under this Order, provided that: (1) The Covered Entity is subject to and complies with the requirements of FINMA Circular 2017/1; BA article 3; CO article 958f, in each case with respect to the relevant security-based swap or activity; (2) With respect to the portion of Exchange Act rule 18a–6(b)(2)(vii) that relates to one or more provisions of Exchange Act rule 15Fh–3 for which substituted compliance is available under this Order, the Covered Entity applies substituted compliance for such business conduct standard(s) of Exchange Act rule 15Fh–3 pursuant to this Order, as applicable, with respect to the relevant security-based swap or activity; and (3) With respect to the portion of Exchange Act rule 18a–6(b)(2)(vii) that relates to Exchange Act rule 15Fk–1, the Covered Entity applies substituted compliance for Exchange Act section 15F(k) and Exchange Act rule 15Fk–1 pursuant to this Order; (G) The requirements of Exchange Act rule 18a–6(c), provided that: (1) The Covered Entity is subject to and complies with the requirements of BA article 3; BO article 12; CO articles 686 and 958f; and (2) This Order does not extend to the requirements of Exchange act rule 18a– 6(c) relating to Forms SBSE, SBSE–A, SBSE–C, SBSE–W, all amendments to these forms, and all other licenses or other documentation showing the registration of the Covered Entity with any securities regulatory authority or the U.S. Commodity Futures Trading Commission; (H) The requirements of Exchange Act rule 18a–6(d)(1), provided that the Covered Entity is subject to and complies with the requirements of CO article 958f; BA article 3; BO article 12; CO article 330a; FINMA Circular 2008/ 21, Annex 3, margins 30–33; (I) The requirements of Exchange Act rule 18a–6(d)(2)(ii), provided that the Covered Entity is subject to and complies with the requirements of BA article 3; BO article 12; CO article 958f; FINMA Circular 2008/21 margins 122, 128, 132, and Appendix 2; VerDate Sep<11>2014 16:50 Oct 14, 2021 Jkt 256001 (J) The requirements of Exchange Act rule 18a–6(d)(3)(ii), provided that the Covered Entity is subject to and complies with the requirements of CO article 958f; BA article 3; BO article 12; (K) The requirements of Exchange Act rule 18a–6(d)(4) and (d)(5), regarding one or more provisions of Exchange Act rules 15Fi–3 or 15Fi–4 for which substituted compliance is available under this Order, provided that: (1) The Covered Entity is subject to and complies with the requirements of CO article 958f; FinMIA article 106; (2) With respect to the portion of Exchange Act rule 18a–6(d)(4) and (d)(5) that relates to Exchange Act rules 15Fi– 3 or 15Fi–4, the Covered Entity applies substituted compliance for Exchange Act rules 15Fi–3 and 15Fi–4 pursuant to this Order; and (3) This Order does not extend to the requirements of Exchange Act rule 18a– 6(d)(4) and (d)(5) relating to Exchange Act rule 15Fi–5; (L) The requirements of Exchange Act rule 18a–6(e), provided that the Covered Entity is subject to and complies with the requirements of AccO; and (M) The requirements of Exchange Act rule 18a–6(f), provided that the Covered Entity is subject to and complies with the requirements of FINMA Circular 2018/3. (ii) Paragraph (d)(2)(i) is subject to the following further conditions: (A) A Covered Entity may apply the substituted compliance determination in paragraph (d)(2)(i)(F) to records related to Exchange Act rule 15Fh–3(h) in respect of one or more security-based swaps or activities related to securitybased swaps; and (B) This Order does not extend to the requirements of Exchange Act rule 18a– 6(b)(2)(v), (b)(2)(vi), or (b)(2)(viii). (3) File Reports. The requirements of Exchange Act rule 18a–7(a)(2) and the requirements of Exchange Act rule 18a– 7(j) as applied to the requirements of Exchange Act rule 18a–7(a)(2), provided that: (i) The Covered Entity is subject to and complies with the requirements of BA article 6a; BO article 32; CAO article 16; FINMA Circular 2020/1; and FINMA Circular 2016/1; and (ii) The Covered Entity files periodic unaudited financial and operational information with the Commission or its designee in the manner and format required by Commission rule or order and presents the financial information in the filing in accordance with generally accepted accounting principles that the Covered Entity uses to prepare general purpose publicly available or available to be issued financial statements in Switzerland. PO 00000 Frm 00062 Fmt 4703 Sfmt 4703 (4)(i) Provide Notification. The requirements of the following provisions of Exchange Act rule 18a–8, provided that the Covered Entity complies with the relevant conditions in this paragraph (d)(4)(i) and with the applicable conditions in paragraph (d)(4)(ii): (A) The requirements of Exchange Act rule 18a–8(c) and the requirements of Exchange Act rule 18a–8(h) as applied to the requirements of Exchange Act rule 18a–8(c), provided that the Covered Entity is subject to and complies with the requirements of FINMASA article 29(2); CAO articles 14, 42(3), 101, and 130(4); and Liquidity Ordinance articles 17b, and 26(2). (B) The requirements of Exchange Act rule 18a–8(d) and the requirements of Exchange Act rule 18a–8(h) as applied to the requirements of Exchange Act rule 18a–8(d), provided that: (1) The Covered Entity is subject to and complies with the requirements of FINMASA article 29(2); CAO articles 14, 42(3), 101, and 130(4); and Liquidity Ordinance articles 17b, and 26(2); and (2) This Order does not extend to the requirements of Exchange Act rule 18a– 8(d) to give notice with respect to books and records required by Exchange Act rule 18a–5 for which the Covered Entity does not apply substituted compliance pursuant to this Order; (ii) Paragraph (d)(4)(i) is subject to the following further conditions: (A) The Covered Entity: (1) Simultaneously sends a copy of any notice required to be sent by Swiss law cited in this paragraph of the Order to the Commission in the manner specified on the Commission’s website; and (2) Includes with the transmission the contact information of an individual who can provide further information about the matter that is the subject of the notice; and (B) This Order does not extend to the requirements of paragraph (g) of rule 18a–8 or to the requirements of Exchange Act rule 18a–8(h) as applied to such requirements. (5) Daily Trading Records. The requirements of Exchange Act section 15F(g), provided that the Covered Entity is subject to and complies with the requirements of CO article 958f; FMIO article 36; FMIO–FINMA article 1; FinMIA articles 38, 104, and 106; FINMA Circular 2013/8 marg. 60 and marg. 61. (6) Examination and Production of Records. Notwithstanding the forgoing provisions of paragraph (d) of this Order, this Order does not extend to, and Covered Entities remain subject to, the requirement of Exchange Act section E:\FR\FM\15OCN1.SGM 15OCN1 Federal Register / Vol. 86, No. 197 / Friday, October 15, 2021 / Notices 15F(f) to keep books and records open to inspection by any representative of the Commission and the requirement of Exchange Act rule 18a–6(g) to furnish promptly to a representative of the Commission legible, true, complete, and current copies of those records of the Covered Entity that are required to be preserved under Exchange Act rule 18a– 6, or any other records of the Covered Entity that are subject to examination or required to be made or maintained pursuant to Exchange Act section 15F that are requested by a representative of the Commission. (7) English Translations. Notwithstanding the forgoing provisions of paragraph (d) of this Order, to the extent documents are not prepared in the English language, Covered Entities must promptly furnish to a representative of the Commission upon request an English translation of any record, report, or notification of the Covered Entity that is required to be made, preserved, filed, or subject to examination pursuant to Exchange Act section 15F of this Order. (e) Definitions (1) ‘‘Covered Entity’’ means an entity that: (i) Is a security-based swap dealer registered with the Commission; (ii) Is not a ‘‘U.S. person,’’ as that term is defined in rule 3a71–3(a)(4) under the Exchange Act; (iii) Is a systemically important bank authorized by FINMA to conduct banking activities in the Swiss Confederation; and (iv) Is supervised by FINMA under the intensive and continual supervision model as a Category 1 firm as that term is defined in BO Annex 3. (2) ‘‘AccO’’ means the Ordinance on the Maintenance and Retention of Accounts (Accounts Ordinance), CC 221.431, as amended from time to time. (3) ‘‘AMLA’’ means the Federal Act on Combating Money Laundering and Terrorist Financing (Anti-Money Laundering Act), CC 955, as amended from time to time. (4) ‘‘AMLO–FINMA’’ means the Ordinance of the Swiss Financial Market Supervisory Authority on the Prevention of Money Laundering and the Financing of Terrorist Activities (FINMA Anti-Money Laundering Ordinance), CC 955.033.0, as amended from time to time. (5) ‘‘BA’’ means the Federal Act on Banks and Savings Banks (Banking Act), CC 952, as amended from time to time. (6) ‘‘BO’’ means the Ordinance on Banks and Savings Banks (Banking Ordinance), CC 952.02, as amended from time to time. VerDate Sep<11>2014 16:50 Oct 14, 2021 Jkt 256001 (7) ‘‘CAO’’ means the Ordinance concerning Capital Adequacy and Risk Diversification for Banks and Securities Dealers (Capital Adequacy Ordinance), CC 952.03, as amended from time to time. (8) ‘‘CO’’ means the Federal Act on the Amendment of the Swiss Civil Code (Part Five: The Code of Obligations), CC 220, as amended from time to time. (9) ‘‘FinIA’’ means Federal Act on Financial Institutions (Financial Institutions Act), CC 954.1, as amended from time to time. (10) ‘‘FINMA’’ means the Swiss Financial Market Supervisory Authority. (11) ‘‘FINMA Circular 2008/4’’ means the FINMA Circular 2008/4, Securities Journals. (12) ‘‘FINMA Circular 2008/21’’ means the FINMA Circular 2008/21, Operational Risk—Banks. (13) ‘‘FINMA Circular 2010/1’’ means the FINMA Circular 2010/1, Remuneration schemes. (14) ‘‘FINMA Circular 2013/8’’ means the FINMA Circular 2013/8, Market conduct rules, Supervisory rules on market conduct in securities trading. (15) ‘‘FINMA Circular 2016/1’’ means the FINMA Circular 2016/1, Disclosure—Banks. (16) ‘‘FINMA Circular 2017/1’’ means the FINMA Circular 2017/1, Corporate Governance—Banks. (17) ‘‘FINMA Circular 2018/3’’ means the FINMA Circular 2018/3, Outsourcing—Banks and Insurers. (18) ‘‘FINMA Circular 2020/1’’ means the FINMA Circular 2020/1, Accounting—Banks. (19) ‘‘FINMASA’’ means the Federal Act on the Swiss Financial Market Supervisory Authority (Financial Market Supervision Act), CC 956.1, as amended from time to time. (20) ‘‘FinMIA’’ means the Federal Act on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading (Financial Market Infrastructure Act), CC 958.1, as amended from time to time. (21) ‘‘FMIO’’ means the Ordinance on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading (Financial Market Infrastructure Ordinance), CC 958.11, as amended from time to time. (22) ‘‘FMIO–FINMA’’ means the Ordinance of the Swiss Financial Market Supervisory Authority on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading (FINMA Financial Market Infrastructure Ordinance), CC 958.111, as amended from time to time. (23) ‘‘FinSA’’ means the Federal Act on Financial Services (Financial PO 00000 Frm 00063 Fmt 4703 Sfmt 4703 57469 Services Act), CC 950.1, as amended from time to time. (24) ‘‘Liquidity Ordinance’’ means the Ordinance on the Liquidity of Banks. By the Commission. J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–22475 Filed 10–14–21; 8:45 am] BILLING CODE 8011–01–P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #17217 and #17218; Pennsylvania Disaster Number PA–00116] Presidential Declaration of a Major Disaster for Public Assistance Only for the State of Pennsylvania Small Business Administration. Notice. AGENCY: ACTION: This is a Notice of the Presidential declaration of a major disaster for Public Assistance Only for the State of Pennsylvania (FEMA–4618– DR), dated 10/08/2021. Incident: Remnants of Hurricane Ida. Incident Period: 08/31/2021 through 09/05/2021. DATES: Issued on 10/08/2021. Physical Loan Application Deadline Date: 12/07/2021. Economic Injury (EIDL) Loan Application Deadline Date: 07/08/2022. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street SW, Suite 6050, Washington, DC 20416, (202) 205–6734. SUPPLEMENTARY INFORMATION: Notice is hereby given that as a result of the President’s major disaster declaration on 10/08/2021, Private Non-Profit organizations that provide essential services of a governmental nature may file disaster loan applications at the address listed above or other locally announced locations. The following areas have been determined to be adversely affected by the disaster: Primary Counties: Bucks, Chester, Montgomery. The Interest Rates are: SUMMARY: Percent For Physical Damage: Non-Profit Organizations with Credit Available Elsewhere ... Non-Profit Organizations without Credit Available Elsewhere ..................................... E:\FR\FM\15OCN1.SGM 15OCN1 2.000 2.000

Agencies

[Federal Register Volume 86, Number 197 (Friday, October 15, 2021)]
[Notices]
[Pages 57455-57469]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-22475]


=======================================================================
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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93284; File No. S7-07-21]


Order Granting Conditional Substituted Compliance in Connection 
With Certain Requirements Applicable to Non-U.S. Security-Based Swap 
Dealers Subject to Regulation in the Swiss Confederation

October 8, 2021.

I. Overview

    UBS AG and Credit Suisse AG (the ``Swiss Firms'') submitted an 
application requesting that the Securities and Exchange Commission 
(``Commission'') determine, pursuant to the Securities Exchange Act of 
1934 (``Exchange Act'') rule 3a71-6, that security-based swap dealers 
(``SBSDs'') subject to regulation in the Swiss Confederation 
(``Switzerland'') conditionally may satisfy requirements under the 
Exchange Act by complying with comparable Swiss requirements.\1\ The 
Swiss Firms sought substituted compliance in connection with certain 
Exchange Act requirements related to risk control, internal supervision 
and compliance, and record keeping, reporting, and notification.\2\ The 
Swiss Application incorporated comparability analyses between the 
relevant requirements in Exchange Act section 15F and the rules and 
regulations thereunder and applicable Swiss law, as well as information 
regarding Swiss supervisory and enforcement frameworks.
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    \1\ See Letter from Colin Lloyd of Cleary Gottlieb Steen & 
Hamilton LLP on behalf of UBS AG and Credit Suisse AG to Vanessa 
Countryman, Secretary, Commission, dated August 10, 2021 (the 
``Swiss Application''). The Swiss Application is available on the 
Commission's website at: https://www.sec.gov/page/exchange-act-substituted-compliance-and-listed-jurisdiction-applications-security-based-swap.
    \2\ ``Risk control'' includes requirements related to internal 
risk management, trade acknowledgment and verification, portfolio 
reconciliation and dispute resolution, portfolio compression and 
trading relationship documentation; ``internal supervision and 
compliance'' includes requirements related to diligent supervision, 
conflicts of interest, information gathering under Exchange Act 
section 15F(j), 15 U.S.C. 78o-10(j), and chief compliance officers; 
``record keeping, reporting, and notification'' includes 
requirements related to making and keeping current certain 
prescribed records, preservation of records, reporting, and 
notification.
---------------------------------------------------------------------------

    On August 10, 2021, the Commission issued a notice of the Swiss 
Application, accompanied by a proposed order (the ``proposed Order'') 
to make a positive substituted compliance determination in

[[Page 57456]]

connection with the Swiss Application.\3\ The proposed Order 
incorporated a number of conditions to tailor the scope of substituted 
compliance consistent with the prerequisite that relevant Swiss 
requirements produce regulatory outcomes that are comparable to 
relevant requirements under the Exchange Act.
---------------------------------------------------------------------------

    \3\ See Exchange Act Release No. 92632 (Aug. 10, 2021), 86 FR 
45770, 45792 (``Swiss Substituted Compliance Notice and Proposed 
Order'').
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    As discussed below, the Commission is adopting a final Order that 
has been modified from the proposal to make clarifying changes in 
response to comments.

II. Substituted Compliance Framework and Prerequisites

A. Substituted Compliance Framework and Purpose

    As the Commission has discussed previously,\4\ Exchange Act rule 
3a71-6 provides a framework whereby non-U.S. SBSDs and major security-
based swap participants (``MSBSPs'') (together, ``SBS Entities'') may 
satisfy certain requirements under Exchange Act section 15F by 
complying with comparable regulatory requirements of a foreign 
jurisdiction.\5\ Because substituted compliance does not constitute 
exemptive relief, but instead provides an alternative method by which 
non-U.S. SBS Entities may comply with applicable Exchange Act 
requirements, the non-U.S. SBS Entities would remain subject to the 
relevant requirements under section 15F. The Commission accordingly 
will retain the authority to inspect, examine and supervise those SBS 
Entities' compliance and take enforcement action as appropriate. Under 
the substituted compliance framework, failure to comply with the 
applicable foreign requirements and other conditions to a substituted 
compliance order would lead to a violation of the applicable 
requirements under the Exchange Act and potential enforcement action by 
the Commission (as opposed to automatic revocation of the substituted 
compliance order).
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    \4\ See Exchange Act Release No. 90765 (Dec. 22, 2020), 85 FR 
85686, 85687 (Dec. 29, 2020) (``German Substituted Compliance 
Order''); Exchange Act Release No. 92484 (July 23, 2021), 86 FR 
41612, 41612-13 (Aug. 2, 2021) (``French Substituted Compliance 
Order''); Exchange Act Release No. 92529 (July 30, 2021), 86 FR 
43318, 43318-19 (Aug. 6, 2021) (``UK Substituted Compliance 
Order''); Exchange Act Release No. 47668 (August 20, 2021), 85 FR 
47668, 47668-69 (Aug. 26, 2021) (``Spanish Substituted Compliance 
Notice and Proposed Order'').
    \5\ See Exchange Act Release No. 77617 (Apr. 14, 2016), 81 FR 
29960, 30079 (May 13, 2016) (``Business Conduct Adopting Release'').
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    Under rule 3a71-6, substituted compliance potentially is available 
in connection with certain section 15F requirements,\6\ but is not 
available in connection with antifraud prohibitions and certain other 
requirements under the Federal securities laws.\7\ SBS Entities in 
Switzerland accordingly must comply directly with those requirements 
notwithstanding the availability of substituted compliance for other 
requirements.
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    \6\ 17 CFR 240.3a71-6(d).
    \7\ Swiss Substituted Compliance Notice and Proposed Order, 86 
FR at 45771 n.5 (addressing unavailability of substituted compliance 
in connection with antifraud provisions, as well as provisions 
related to transactions with counterparties that are not eligible 
contract participants (``ECPs''), segregation of customer assets, 
required clearing upon counterparty election, regulatory reporting 
and public dissemination, and registration of offerings).
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    The substituted compliance framework reflects the cross-border 
nature of the security-based swap market, and is intended to promote 
efficiency and competition by helping to address potential duplication 
and inconsistency between relevant U.S. and foreign requirements.\8\ In 
practice, substituted compliance may be expected to help SBS Entities 
leverage their existing systems and practices to comply with relevant 
Exchange Act requirements in conjunction with their compliance with 
relevant foreign requirements. As of August 6, 2021, market 
participants have been required to assess whether their security-based 
swap activities meet or exceed certain thresholds for registration with 
the Commission as SBS Entities, with the first registrations by SBSDs 
required by November 1, 2021, and by MSBSPs by December 1, 2021.\9\ 
Substituted compliance may be expected to assist such market 
participants in preparing for registration.
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    \8\ See generally Business Conduct Adopting Release, 81 FR at 
30073 (noting that the cross-border nature of the security-based 
swap market poses special regulatory challenges, in that relevant 
U.S. requirements ``have the potential to lead to requirements that 
are duplicative of or in conflict with applicable foreign business 
conduct requirements, even when the two sets of requirements 
implement similar goals and lead to similar results'').
    \9\ See ``Key Dates for Registration of Security-Based Swap 
Dealers and Major Security-Based Swap Participants,'' available at 
https://www.sec.gov/page/key-dates-registration-security-based-swap-dealers-and-major-security-based-swap-participants.
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B. Scope of Substituted Compliance

    The Swiss Application relates solely to entity-level requirements 
and for entity-level Exchange Act requirements a Covered Entity must 
choose either to apply substituted compliance pursuant to the Order 
with respect to all security-based swap business subject to the 
relevant Swiss requirements or to comply directly with the Exchange Act 
with respect to all such business; a Covered Entity may not choose to 
apply substituted compliance for some of the business subject to the 
relevant Swiss requirements and comply directly with the Exchange Act 
for another part of the business that is subject to the relevant Swiss 
requirements. Additionally, for entity-level Exchange Act requirements, 
if the Covered Entity also has security-based swap business that is not 
subject to the relevant Swiss requirements, the Covered Entity must 
either comply directly with the Exchange Act for that business or 
comply with the terms of another applicable substituted compliance 
order.

C. Specific Prerequisites

1. Comparability of Regulatory Outcomes
    Rule 3a71-6, adopted by the Commission in 2016, describes the 
requirements for the Commission to make a substituted compliance 
determination. Under the rule, the Commission must determine that the 
analogous foreign requirements are comparable to otherwise applicable 
requirements under the Exchange Act (i.e., the relevant requirements in 
the Exchange Act and the rules and regulations thereunder), after 
accounting for factors such as ``the scope and objectives of the 
relevant foreign regulatory requirements'' and ``the effectiveness of 
the supervisory compliance program administered, and the enforcement 
authority exercised'' by the foreign authority.\10\ The comparability 
assessments are to be based on a ``holistic approach'' that ``will 
focus on the comparability of regulatory outcomes rather than 
predicating substituted compliance on requirement-by-requirement 
similarity.'' \11\
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    \10\ Exchange Act rule 3a71-6(a)(2)(i).
    \11\ See Swiss Substituted Compliance Notice and Proposed Order, 
86 FR at 45772; see also Business Conduct Adopting Release, 81 FR at 
30078-79 (further recognizing that ``different regulatory systems 
may be able to achieve some or all of those regulatory outcomes by 
using more or fewer specific requirements than the Commission, and 
that in assessing comparability the Commission may need to take into 
account the manner in which other regulatory systems are informed by 
business and market practices in those jurisdictions''). The 
Commission's assessment of a foreign authority's supervisory and 
enforcement effectiveness--as part of the broader comparability 
analysis--would be expected to consider not only overall oversight 
activities, but also oversight specifically directed at conduct and 
activity relevant to the substituted compliance determination. ``For 
example, it would be difficult for the Commission to make a 
comparability determination in support of substituted compliance if 
oversight is directed solely at the local activities of foreign 
security-based swap dealers, as opposed to the cross-border 
activities of such dealers.'' Business Conduct Adopting Release, 81 
FR at 30079 (footnote omitted). In the Swiss Substituted Compliance 
Notice and Proposed Order, the Commission preliminarily concluded 
that this comparability prerequisite was met in connection with a 
number of requirements under the Exchange Act, in some cases with 
the addition of conditions to help ensure the comparability of 
regulatory outcomes.

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[[Page 57457]]

2. Memorandum of Understanding
    Exchange Act rule 3a71-6(a)(2)(ii) further predicates the 
availability of substituted compliance on the Commission and the 
foreign financial regulatory authority or authorities entering into a 
supervisory and enforcement memorandum of understanding and/or other 
arrangement with the relevant foreign financial regulatory authorities 
``addressing supervisory and enforcement cooperation and other matters 
arising under the substituted compliance determination.'' \12\ 
Accordingly, the Commission and FINMA recently entered into a relevant 
memorandum of understanding.\13\ The memorandum of understanding must 
be in place when Covered Entities use substituted compliance to satisfy 
obligations under the Exchange Act.\14\
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    \12\ See Exchange Act rule 3a71-6(a)(2)(ii).
    \13\ The Commission and FINMA have entered into a memorandum of 
understanding to address substituted compliance cooperation, a copy 
of which is on the Commission's website at www.sec.gov under the 
``Substituted Compliance'' tab, which is located on the ``Security-
Based Swap Markets'' page in the Division of Trading and Markets 
section of the site.
    \14\ See para. (a)(8) of the Order.
---------------------------------------------------------------------------

3. Certification and Opinion of Counsel
    A party or group of parties that may potentially rely on a 
substituted compliance order may submit a substituted compliance 
application only if each such party provides a certification and 
opinion of counsel that the entity can, ``as a matter of law, provide 
the Commission with prompt access to its books and records, and can, as 
a matter of law, submit to onsite inspection and examination by the 
Commission.'' \15\ The Swiss Application included a certification and 
opinion of counsel and, in the Commission's preliminary view, met this 
requirement.\16\ The Commission received no comments on this 
preliminary view and has not changed its view.
---------------------------------------------------------------------------

    \15\ See Exchange Act rule 3a71-6(c)(1)(ii).
    \16\ See Swiss Substituted Compliance Notice and Proposed Order, 
86 FR at 45771 n.8.
---------------------------------------------------------------------------

III. General Availability of Substituted Compliance Under the Order

A. Covered Entities

1. Proposed Approach
    Under the proposed Order, substituted compliance was only made 
available to ``Covered Entities''--a defined term that would limit the 
scope of the substituted compliance determination to SBSDs that are 
subject to applicable Swiss requirements and oversight. Consistent with 
the parameters of substituted compliance under Exchange Act rule 3a71-
6, the proposed ``Covered Entity'' definition provided that the 
relevant entity must be a security-based swap dealer registered with 
the Commission, and that the entity cannot be a U.S. person.\17\ The 
proposed ``Covered Entity'' definition further provided that the entity 
must be a systemically important bank authorized by FINMA to conduct 
banking activities in Switzerland.\18\ Each entity would also have to 
be supervised by FINMA under the intensive and continual supervision 
model as a Category 1 firm as that term is defined in BO Annex 3.\19\ 
These prongs of the definition were intended to help ensure that 
Covered Entities are subject to relevant Swiss requirements and 
oversight.
---------------------------------------------------------------------------

    \17\ See Swiss Substituted Compliance Notice and Proposed Order, 
86 FR at 45791.
    \18\ Id.
    \19\ Id.
---------------------------------------------------------------------------

2. Commenter Views and Final Provisions
    No commenters addressed the proposed Covered Entity definition and 
the Commission is adopting the definition as proposed.

B. Additional General Conditions

1. Proposed Approach
    The proposed Order incorporated a number of additional general 
conditions and other prerequisites, to help ensure that the relevant 
Swiss requirements that form the basis for substituted compliance in 
practice will apply to the Covered Entity's security-based swap 
business and activities, and to promote the Commission's oversight over 
entities that avail themselves of substituted compliance:
     ``Subject to and Complies with'' applicability condition--
For each relevant section of the proposed Order, a positive substituted 
compliance determination would be predicated on the entity being 
subject to and complying with the applicable Swiss requirements needed 
to establish comparability.\20\
---------------------------------------------------------------------------

    \20\ See Swiss Substituted Compliance Notice and Proposed Order, 
86 FR at 45788.
---------------------------------------------------------------------------

     Security-based swaps and transactions as ``derivatives'' 
or ``derivative transactions''--For each relevant section of the 
proposed Order that requires the application of, and the Covered 
Entity's compliance with, provisions of FinMIA and FMIO, a positive 
substituted compliance determination would require that the relevant 
security-based swaps and security-based swap transactions are 
``derivatives'' and/or ``derivative transactions'' for purposes of 
FinMIA article 2(c), or otherwise is described by the relevant language 
of that provision.\21\
---------------------------------------------------------------------------

    \21\ Id.
---------------------------------------------------------------------------

     ``Counterparty'' status--For each section of the proposed 
Order that requires the application of, and the Covered Entity's 
compliance with, the provisions of FinMIA and FMIO, the proposed Order 
would require that the Covered Entity comply with the applicable 
conditions of the Order regardless of whether the Covered Entity's 
counterparty is a ``counterparty'' for purposes of FinMIA article 93, 
or otherwise is described by the relevant language of that 
provision.\22\
---------------------------------------------------------------------------

    \22\ Id.
---------------------------------------------------------------------------

     Counterparty status as ``company''--For each section of 
the proposed Order that requires the application of, and the Covered 
Entity's compliance with, the provisions of FMIO, the Covered Entity 
would be required to comply with the applicable conditions of the 
proposed Order regardless of whether a Covered Entity's counterparty 
were a ``company'' for purposes of FMIO article 77, or otherwise is 
described by the relevant language of that provision.\23\
---------------------------------------------------------------------------

    \23\ Id.
---------------------------------------------------------------------------

     Covered Entity as ``bank''--For each condition of the 
proposed Order that requires the application of, and the Covered 
Entity's compliance with, the provisions of the BA and BO and/or other 
Swiss requirements adopted pursuant to those provisions, the Covered 
Entity would be required to be a ``bank'' for purposes of BA article 
1a, or otherwise is described by the relevant language of that 
provision.\24\
---------------------------------------------------------------------------

    \24\ Id.
---------------------------------------------------------------------------

     Covered Entity as ``systemically important''--For each 
condition of the proposed Order that requires the application of, and 
the Covered Entity's compliance with, the provisions of FINMA Circular 
2017/1, the Covered

[[Page 57458]]

Entity would be required to be ``systemically important'' for purposes 
of BA article 8(3), or otherwise is described by the relevant language 
of that provision.\25\
---------------------------------------------------------------------------

    \25\ Id.
---------------------------------------------------------------------------

     Covered Entity as ``category 1''--For each condition of 
the proposed Order that required the application of, and the Covered 
Entity's compliance with, the provisions of FINMA Circular 2017/1, the 
Covered Entity would be required to be supervised as ``category 1,'' as 
defined in BO articles 2(2) and 2(3) and BO Annex 3, or otherwise is 
described by the relevant language of those provisions.\26\
---------------------------------------------------------------------------

    \26\ Id.
---------------------------------------------------------------------------

     ``Institution-specific approach'' to operational risk 
quantification--For each condition in the proposed Order that requires 
the application of, and the Covered Entity's compliance with, the 
provisions of FINMA Circular 2008/21 margins 45-107, the Covered Entity 
would be required to apply he ``institution-specific approach'' to 
quantifying capital requirements for operational risk, as defined in 
CAO article 94, or otherwise is described by the relevant language of 
those provisions, and as approved by FINMA.\27\
---------------------------------------------------------------------------

    \27\ Id.
---------------------------------------------------------------------------

     Memorandum of understanding--Consistent with the 
requirements of rule 3a71-6 and the Commission's need for access to 
information regarding registered entities, substituted compliance under 
the proposed Order would be conditioned on the Commission having an 
applicable memorandum of understanding or other arrangement with FINMA 
addressing cooperation with respect to the Order at the time the 
Covered Entity makes use of substituted compliance.\28\
---------------------------------------------------------------------------

    \28\ Id.
---------------------------------------------------------------------------

     Notice of reliance on substituted compliance--To assist 
the Commission's oversight of firms that avail themselves of 
substituted compliance, a Covered Entity relying on the Order would 
have to provide notice of its intent to rely on the Order by notifying 
the Commission in the manner specified on the Commission's website.\29\ 
In the notice, the Covered Entity would need to identify each specific 
substituted compliance determination in the proposed Order for which 
the Covered Entity intends to apply substituted compliance.\30\ If a 
Covered Entity were to elect not to apply substituted compliance with 
respect to a specific substituted compliance determination in the 
proposed Order, it would be required to comply with the Exchange Act 
requirements subject to that determination. Finally, a Covered Entity 
would have to promptly update its notice to the Commission if it 
intended to modify its reliance on the positive substituted compliance 
determinations in the proposed Order.\31\
---------------------------------------------------------------------------

    \29\ Id.
    \30\ See para. (a)(9) of the Order. If the Covered Entity 
intends to rely on all the substituted compliance determinations in 
a given paragraph of the Order, it can cite that paragraph in the 
notice. For example, if the Covered Entity intends to rely on the 
risk control determinations in paragraph (b) of the Order, it would 
indicate in the notice that it is relying on the determinations in 
paragraph (b). However, if the Covered Entity intends to rely on the 
internal risk management, trade acknowledgement and verification, 
and portfolio reconciliation determinations but not the portfolio 
compression determination, it would need to indicate in the notice 
that it is relying on paragraphs (b)(1)-(3) of the Order. In this 
case, paragraph (b)(4) of the Order (the portfolio compression 
determination) would be excluded from the notice and the Covered 
Entity would need to comply with the Exchange Act portfolio 
compression requirements. Further, as discussed below in section 
VI.B, the recordkeeping and reporting determinations in the Order 
have been structured to provide Covered Entities with a high level 
of flexibility in selecting specific requirements within those rules 
for which they want to rely on substituted compliance. For example, 
paragraph (d)(1)(i) of the Order sets forth the Commission's 
preliminary substituted compliance determinations with respect to 
the requirements of Exchange Act rule 18a-5, 17 CFR 240.18a-5. These 
determinations are set forth in paragraphs (d)(1)(i)(A) through (K). 
If a Covered Entity intends to rely on some but not all of the 
determinations, it would need to identify in the notice the specific 
determinations in this paragraph it intends to rely on (e.g., 
paragraphs (d)(1)(i)(A), (B), (C), (D), (G), (H), (I), and (K)). For 
any determinations excluded from the notice, the Covered Entity 
would need to comply with the Exchange Act rule 18a-5 requirement.
    \31\ A Covered Entity would modify its reliance on the positive 
substituted compliance determinations in the Order, and thereby 
trigger the requirement to update its notice, if it adds or 
subtracts determinations for which it is applying substituted 
compliance or completely discontinues its reliance on the Order.
---------------------------------------------------------------------------

     Notification related to changes in capital category--
Covered Entities with a prudential regulator would need to apply 
substituted compliance with respect to the requirements of Exchange Act 
rule 18a-8(c) and the requirements of Exchange Act rule 18a-8(h) as 
applied to Exchange Act rule (c).\32\ Exchange Act rule 18a-8(c) 
generally requires every security-based swap dealer with a prudential 
regulator that files a notice of adjustment of its reported capital 
category with the Federal Reserve Board, the Office of the Comptroller 
of the Currency, or the Federal Deposit Insurance Corporation to give 
notice of this fact to the that same day by transmitting a copy to the 
Commission of the notice of adjustment of reported capital category in 
accordance with Exchange Act rule 18a-8(h).\33\ Exchange Act rule 18a-
8(h) sets forth the manner in which every notice or report required to 
be given or transmitted pursuant to Exchange Act rule 18a-8 must be 
made. While Exchange Act rule 18a-8(c) is not linked to an Exchange Act 
capital requirement, it is linked to capital requirements in the U.S. 
promulgated by the prudential regulators. In its application, the Swiss 
Firms cited various Swiss provisions as providing similar outcomes to 
the notifications requirements of Exchange Act Rule 18a-8.\34\ This 
general condition would be designed to clarify that a prudentially 
regulated Covered Entity must provide the Commission with copies of any 
notifications regarding changes in the Covered Entity's capital 
situation required by Swiss law. The intent is to align the 
notification requirement with the Swiss capital requirements applicable 
to the Covered Entity.
---------------------------------------------------------------------------

    \32\ See Swiss Substituted Compliance Notice and Proposed Order, 
86 FR at 45788.
    \33\ 17 CFR 240.18a-8(c) and (h).
    \34\ See FINMASA article 29(2); CAO articles 14, 42(3), 101, and 
130(4); and Liquidity Ordinance articles 17b and 26(2).
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2. Commenter Views and Final Provisions
    The Commission did not receive comments addressing the substance of 
the proposed Order's additional general conditions, and the Commission 
is issuing those general conditions largely as proposed.\35\ In the 
Commission's view, the conditions are structured appropriately to 
predicate a positive substituted compliance determination on the 
applicability of relevant Swiss requirements needed to establish 
comparability, as well as on the continued effectiveness of the 
requisite memorandum of understanding, and the provision of notice to 
the Commission regarding the Covered Entity's intent to rely on 
substituted compliance. The Commission did receive one comment 
recommending two typographical changes to the general conditions, which 
the Commission is incorporating in the Order.\36\
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    \35\ See paras. (a)(1) through (10) of the Order.
    \36\ See Letter from Gordon Kiesling, Managing Director, UBS AG, 
Thomas Bischof, Managing Director, UBS AG, Maria Chiodi, Managing 
Director, Credit Suisse AG, and Drew Shoemaker, Managing Director, 
Credit Suisse AG (Sept. 10, 2021) (``Swiss Firms' Letter'') at Annex 
(proposing edits to paragraphs (a)(2) and (a)(6) of the Order to add 
the word ``whether'' to (a)(2) and to change ``is'' to ``are'' in 
(a)(6)).

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[[Page 57459]]

IV. Substituted Compliance for Risk Control Requirements

A. Proposed Approach

    The Swiss Application in part requested substituted compliance in 
connection with risk control requirements relating to:
     Internal risk management--Internal risk management system 
requirements that address the obligation of registered entities to 
follow policies and procedures reasonably designed to help manage the 
risks associated with their business activities.
     Trade acknowledgment and verification--Trade 
acknowledgment and verification requirements intended to help avoid 
legal and operational risks by requiring definitive written records of 
transactions and procedures to avoid disagreements regarding the 
meaning of transaction terms.
     Portfolio reconciliation and dispute reporting--Portfolio 
reconciliation and dispute reporting provisions that require that 
counterparties engage in portfolio reconciliation and resolve 
discrepancies in connection with uncleared security-based swaps, and to 
provide prompt notification to the Commission and applicable prudential 
regulators regarding certain valuation disputes.
     Portfolio compression--Portfolio compression provisions 
that require that SBS Entities have procedures addressing bilateral 
offset, bilateral compression and multilateral compression in 
connection with uncleared security-based swaps.
     Trading relationship documentation--Trading relationship 
documentation provisions that require SBS Entities to have procedures 
to execute written security-based swap trading relationship 
documentation with their counterparties prior to, or contemporaneously 
with, executing certain security-based swaps.\37\
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    \37\ See Exchange Act Release No. 87782 (Dec. 18, 2019) 85 FR 
6359, 6361 (Feb. 4, 2020) (``Risk Mitigation Adopting Release'').The 
Swiss Application discusses Swiss requirements regarding records of 
agreements with counterparties. See Swiss Application section II.1.c 
at 17-19, 24-31.
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    Taken as a whole, these risk control requirements help to promote 
market stability by mandating that registered entities follow practices 
that are appropriate to manage the market, counterparty, operational, 
and legal risks associated with their security-based swap businesses.
    No Proposed Positive Substituted Compliance Determination--Dispute 
Reporting and Trading Relationship Documentation: In connection with 
dispute reporting and trading relationship documentation, the 
Commission stated a preliminary view that the Swiss requirements were 
not comparable to Exchange Act requirements.\38\ The Commission noted 
in its initial assessment of the comparability of dispute reporting 
requirements that paragraph (c) of Exchange Act rule 15Fi-3 requires 
SBSDs to promptly report to the Commission valuation disputes in excess 
of $20 million that have been outstanding for three or five business 
days (depending on counterparty types),\39\ and that Swiss law lacks a 
specific requirement for reporting security-based swap valuation 
disputes in excess of $20 million.\40\ The Commission noted in its 
initial assessment of trading relationship documentation requirements 
that Exchange Act rule 15Fi-5 requires that ``security-based swap 
trading relationship documentation shall be in writing and shall 
include all terms governing the trading relationship between the 
security-based swap dealer . . . and its counterparty,'' \41\ and that 
under Swiss law there is no explicit requirement to agree in writing to 
all terms governing the trading relationship.\42\ Considering these and 
other differences described in the proposed Order,\43\ the Commission 
did not propose to make a positive substituted compliance determination 
with respect to dispute reporting or trading relationship documentation 
requirements.
---------------------------------------------------------------------------

    \38\ See Swiss Substituted Compliance Notice and Proposed Order, 
86 FR at 45774-75 (excluding Exchange Act rule 15Fi-3(c) covering 
reporting of security-based swap valuation disputes from the risk 
control provisions covered by paragraph (b)(3) the proposed Order).
    \39\ See 17 CFR 240.15Fi-3(c).
    \40\ See Swiss Substituted Compliance Notice and Proposed Order, 
86 FR at 45774-75.
    \41\ See 17 CFR 240.15Fi-5(b)(1).
    \42\ See Swiss Substituted Compliance Notice and Proposed Order, 
86 FR at 45775.
    \43\ See id.
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    Proposed Positive Substituted Compliance Determination--Internal 
Risk Management, Trade Acknowledgement and Verification, Portfolio 
Reconciliation and Portfolio Compression: With respect to these risk 
control requirements, the Commission stated a preliminary view based on 
the Swiss Application and the Commission's review of applicable 
provisions, that relevant Swiss requirements would produce regulatory 
outcomes that are comparable to those associated with the internal risk 
management, trade acknowledgement and verification, portfolio 
reconciliation, and portfolio compression risk control requirements. 
Substituted compliance for those risk control requirements accordingly 
would be conditioned on Covered Entities being subject to and complying 
with the Swiss provisions that in the aggregate establish a framework 
that produces outcomes comparable to those associated with the 
analogous risk control requirements under the Exchange Act.\44\
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    \44\ See Swiss Substituted Compliance Notice and Proposed Order, 
86 FR at 45788. (listing in paragraph (b)(1) of the proposed Order 
the requirements a Covered Entity must be subject to and comply with 
in connection with internal risk management, in paragraph (b)(2) the 
requirements a Covered Entity must be subject to and comply with in 
connection with trade acknowledgement and verification, in paragraph 
(b)(3) the requirements a Covered Entity must be subject to and 
comply with in connection with portfolio reconciliation, and 
paragraph (b)(4) the requirements a Covered Entity must be subject 
to and comply with in connection with portfolio compression).
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     Proposed Positive Substituted Compliance Determination 
Conditions--Portfolio Reconciliation: In connection with portfolio 
reconciliation requirements, the Commission stated a preliminarily view 
that Swiss requirements are comparable to Exchange Act requirements, 
but only when part of one of the applicable Swiss requirements is not 
applied. The proposed Order therefore included the requirement that a 
Covered Entity be subject to and comply with FinMIA 108(b) and also the 
requirement that Covered Entities not apply FinMIA article 108(b)'s 
exception for ``small non-financial counterparties'' as defined in 
FinMIA article 98.\45\
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    \45\ See Swiss Substituted Compliance Notice and Proposed Order, 
86 FR at 45788.
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     Proposed Positive Substituted Compliance Determination 
Conditions--Portfolio Compression: In connection with portfolio 
compression requirements, the Commission stated its preliminary view 
that Swiss requirements were comparable to Exchange Act requirements, 
but only when one of the applicable Swiss exclusions is not applied. 
The proposed Order included the requirement that a Covered Entity be 
subject to and comply with FinMIA article 108(d) and also include a 
requirement that Covered Entities not apply the portion of FinMIA 
article 108(d) that excludes application of its requirements when there 
are fewer than 500 non-centrally cleared OTC derivatives transactions 
outstanding.\46\
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    \46\ See Swiss Substituted Compliance Notice and Proposed Order, 
86 FR at 45788.
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B. Commenter Views and Final Provisions

1. General Considerations
    Trading Relationship Documentation: The Commission received one 
comment

[[Page 57460]]

concerning the risk control requirements that specifically addressed 
trading relationship documentation.\47\ In its letter, the commenter 
disagreed with the Commission's preliminary view not to make a positive 
substituted compliance determination for the trading relationship 
documentation requirements of Exchange Act rule 15Fi-5.\48\ In support 
of its position the commenter generally noted the ``various 
documentation-related requirements as listed in the Swiss 
Application,'' \49\ and cited as its primary example that Swiss law 
``does impose an obligation on a Covered Entity to perform daily 
internal valuations for risk management purposes.'' \50\ While the 
described obligation may be relevant for requirements related to 
portfolio reconciliation and internal risk management, it did not 
address the Exchange Act's trading relationship documentation 
requirement that SBSDs have procedures to ensure that trading 
relationship documentation is executed with counterparties prior to, or 
contemporaneously with, executing certain security-based swap 
transactions.\51\ Additionally, consistent with the Swiss Application's 
statement that under Swiss law ``there is no explicit requirement to 
agree in writing to all terms governing the trading relationship,'' 
\52\ the commenter's letter notes that ``Swiss law does not 
specifically require Covered Entities to agree with counterparties on 
the process for valuing each SBS.'' \53\ Although the commenter 
asserted that ``parties will in practice agree on how SBS are valued,'' 
\54\ the Commission has previously stated that voluntary market 
practices do not establish the requisite supervisory framework or 
enforcement authority to establish the specific regulatory requirements 
of Exchange Act section 15Fi-5.\55\ Additionally, the commenter 
asserted that the ``documentation requirement is intended to ensure 
parties always have legal certainty regarding their contractual 
obligations to each other,'' but proceeded to note that its current 
practices under Swiss law do not always fulfill this requirement.\56\ 
Ultimately, the Commission is unconvinced by the commenter's arguments 
that Swiss law imposes trading relationship documentation requirements 
that are comparable to those under Exchange Act rule 15Fi-5. Therefore, 
for the reasons discussed above and in the proposed Order, the 
Commission is not making a positive substituted compliance 
determination in relation to trading relationship documentation.
---------------------------------------------------------------------------

    \47\ See Swiss Firms' Letter at 1-4.
    \48\ See Swiss Substituted Compliance Notice and Proposed Order, 
86 FR at 45775.
    \49\ See Swiss Firms' Letter at 2.
    \50\ See Swiss Firms' Letter at 2.
    \51\ 17 CFR 240.15Fi-5(a)(2), Exchange Act rule 15Fi-5(a)(2).
    \52\ See Swiss Application section II.1.c at 24.
    \53\ See Swiss Firms' Letter at 2.
    \54\ Id.
    \55\ See Swiss Substituted Compliance Notice and Proposed Order, 
86 FR at 45775 n.53.
    \56\ See Swiss Firms' Letter at 2 (stating that ``in very 
limited instances, key terms may be documented in a confirmation 
shortly after an oral agreement'').
---------------------------------------------------------------------------

    The commenter also requested that, as an alternative to a positive 
substituted compliance determination for trading relationship 
documentation generally, the Commission provide relief from the 
requirements of Exchange Act rule 15Fi-5(b)(5) \57\ relating to 
disclosures for insured depository institutions and financial companies 
under the Dodd Frank Act.\58\ In support of its request the commenter 
noted that such relief would be consistent with the rule's goal of 
``enhancing transparency and legal certainty regarding each party's 
rights and obligations under the transaction.'' \59\ However, the 
commenter did not identify Swiss requirements that would require 
comparable disclosure of those rights and obligations or governing law 
under the transaction and, in fact, noted that because Swiss law 
subjects banks to a depositor protection scheme, no documentation is 
required.\60\ The commenter also posits that the Commission should 
grant relief to be consistent with its approach taken in other 
jurisdictions.\61\ However, in each of the jurisdictions cited by the 
commenter, comparable requirements were identified by the applicants to 
warrant a positive substituted compliance determination.\62\ A 
comparable disclosure requirement under Swiss law has not been 
identified in either the Swiss Application \63\ or the commenter's 
letter.\64\
---------------------------------------------------------------------------

    \57\ 17 CFR 240.15Fi-5(b)(5), Exchange Act rule 15Fi-5(b)(5).
    \58\ The trading relationship documentation provisions of rule 
15Fi-5(b)(5), 17 CFR 240.15Fi-5(b)(5), require certain disclosures 
regarding the status of the SBS Entity or its counterparty as an 
insured depository institution or financial counterparty, and 
regarding the possible application of the insolvency regime set 
forth under Title II of the Dodd-Frank Act or the Federal Deposit 
Insurance Act.
    \59\ See Swiss Firms' Letter at 3 (quoting the Risk Mitigation 
Adopting Release, 85 FR at 6361).
    \60\ See Swiss Firms' Letter at 3.
    \61\ See Swiss Firms' Letter at 3-4 (citing to the French 
Substituted Compliance Order, 86 FR at 41623 n.136, German 
Substituted Compliance Order, 85 FR at 85690 n.36, and Spanish 
Substituted Compliance Notice and Proposed Order, 86 FR at 47674 
n.66).
    \62\ See French Substituted Compliance Order, 86 FR at 41623 
n.136 (citing EMIR Margin RTS article 2); German Substituted 
Compliance Order, 85 FR at 85690 n.36 (citing EMIR Margin article 2 
and EMIR Margin RTS article 2); Spanish Substituted Compliance 
Notice and Proposed Order, 86 FR at 47674 n.66 (citing EMIT Margin 
RTS).
    \63\ See Swiss Application section II.1.c at 28-29 (stating that 
``because Swiss law subjects banks to a depositor protection scheme, 
documentation of the bank's status as such is not required'').
    \64\ See Swiss Firms' Letter at 3 (stating that ``Swiss laws do 
not require the same disclosure [as Exchange Act rule 15Fi-
5(b)(5)]'').
---------------------------------------------------------------------------

    As previously stated, in lieu of requiring requirement-by-
requirement similarity, the Commission takes a holistic approach to 
assessing comparability analysis, encompassing all Swiss requirements 
that establish comparability with the applicable regulatory 
outcome.\65\ However, as neither the Swiss Application, nor the 
commenter, has identified an applicable regulation under Swiss law, the 
Commission is unable to determine comparability. Therefore, the 
Commission is not granting the commenter's requested relief and is not 
making a positive substituted compliance determination specific to the 
requirements of Exchange Act rule 15Fi-5(b)(5).
---------------------------------------------------------------------------

    \65\ See Swiss Substituted Compliance Notice and Proposed Order, 
86 FR at 45775.
---------------------------------------------------------------------------

    Dispute Reporting: The Commission did not receive comments on its 
preliminary view with respect to dispute resolution. For the reasons 
described in the proposed Order,\66\ the Commission continues to 
believe that Swiss dispute reporting requirements are not comparable to 
Exchange Act requirements and is not making a positive substituted 
compliance determination for them.
---------------------------------------------------------------------------

    \66\ See id. at 45774-75.
---------------------------------------------------------------------------

    Other Risk Control Requirements: Having not received any comments 
addressing them, the Commission continues to conclude that, taken as a 
whole, the internal risk management, trade acknowledgment and 
verification, portfolio reconciliation, and portfolio compression 
requirements under Swiss law subject Covered Entities to risk 
mitigation and documentation practices that are appropriate to the 
risks associated with their security-based swap businesses, and thus 
help to produce regulatory outcomes that are comparable to the outcomes 
associated with the relevant risk control requirements under the 
Exchange Act. Although the Commission recognizes that there are 
differences between the approaches taken by the relevant risk control 
requirements under the Exchange Act and relevant Swiss

[[Page 57461]]

requirements, the Commission continues to believe that those 
differences on balance should not preclude substituted compliance for 
these requirements, as the relevant Swiss requirements taken as a whole 
help to produce comparable regulatory outcomes.
    To help ensure the comparability of outcomes, substituted 
compliance for the relevant risk control requirements is subject to 
certain conditions. Substituted compliance for internal risk 
management, trade acknowledgment and verification, portfolio 
reconciliation, and portfolio compression requirements is conditioned 
on the Covered Entity being subject to, and complying with, relevant 
Swiss requirements.\67\ In connection with portfolio reconciliation 
requirements, the Order requires that Covered Entities not apply FinMIA 
article 108(b)'s exception for ``small non-financial counterparties'' 
as defined in FinMIA article 98. Requiring that Covered Entities not 
apply this exception helps ensures that the Swiss requirements for 
portfolio reconciliation are applied to Covered Entities in a manner 
comparable to the applicable Exchange Act requirements. In connection 
with portfolio compression requirements, the Order also requires that 
Covered Entities not apply the portion of FinMIA article 108(d) that 
excludes application of its requirements when there are fewer than 500 
non-centrally cleared OTC derivatives transactions outstanding.\68\ 
Requiring that Covered Entities not apply this exclusion helps ensure 
that the Swiss requirements for portfolio compression are applied to 
Covered Entities in a manner comparable to the applicable Exchange Act 
requirements. A Covered Entity that is unable to comply with an 
applicable condition--and thus is not eligible to use substituted 
compliance for the particular set of Exchange Act risk control 
requirements related to that condition--nevertheless may use 
substituted compliance for another set of Exchange Act requirements 
addressed in the Order if it complies with the conditions to the 
relevant parts of the Order.
---------------------------------------------------------------------------

    \67\ See paras. (b)(1) through (4) of the Order.
    \68\ See para. (b)(4)(ii) of the Order.
---------------------------------------------------------------------------

    Under the Order, substituted compliance for the relevant risk 
control requirements (relating to internal risk management, trade 
acknowledgment and verification, portfolio reconciliation, and 
portfolio compression) is not subject to a condition that the Covered 
Entity apply substituted compliance for related recordkeeping 
requirements in Exchange Act rules 18a-5 and 18a-6. A Covered Entity 
that applies substituted compliance for one or more risk control 
requirements, but does not apply substituted compliance for the related 
recordkeeping requirements in Exchange Act rules 18a-5 and 18a-6, will 
remain subject to the relevant provisions of Exchange Act rules 18a-5 
and 18a-6. Those rules require the Covered Entity to make and preserve 
records of its compliance with Exchange Act risk control requirements 
and of its security-based swap activities required or governed by those 
requirements. A Covered Entity that applies substituted compliance for 
a risk control requirement, but complies directly with related 
recordkeeping requirements in rules 18a-5 and 18a-6, therefore must 
make and preserve records of its compliance with the relevant 
conditions of the Order and of its security-based swap activities 
required or governed by those conditions and/or referenced in the 
relevant parts of rules 18a-5 and 18a-6.

V. Substituted Compliance for Internal Supervision, Chief Compliance 
Officer and Additional Exchange Act Section 15F(j) Requirements

A. Proposed Approach

    The Swiss Application requested substituted compliance in 
connection with requirements relating to:
     Internal supervision--Diligent supervision is required 
pursuant to Exchange Act rule 15Fh-3(h),\69\ and Exchange Act section 
15F(j)(5) requires conflict of interest systems and procedures. These 
provisions generally require that SBSEs establish, maintain and enforce 
supervisory policies and procedures that reasonably are designed to 
prevent violations of applicable law, and implement certain systems and 
procedures related to conflicts of interest.\70\
---------------------------------------------------------------------------

    \69\ 17 CFR 240.15Fh-3(h).
    \70\ The Swiss Application addresses Swiss provisions that 
address firms' supervisory systems, responsible individuals and 
qualification requirements for supervisors, supervisory system 
policies and procedures; the chief compliance officer and the chief 
compliance officer's reporting authority and job security, chief 
compliance officer policies and procedures, and chief compliance 
officer reports. See Swiss Application section II.3 at 67-109.
---------------------------------------------------------------------------

     Chief compliance officers--Chief compliance officer 
requirements are set out in Exchange Act section 15F(k) and Exchange 
Act rule 15Fk-1.\71\ These provisions in general require that SBSEs 
designate individuals with the responsibility and authority to 
establish, administer and review compliance policies and procedures, to 
resolve conflicts of interest, and to prepare and certify an annual 
compliance report to the Commission.\72\
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    \71\ 17 CFR 240.15Fk-1.
    \72\ The Swiss Application discusses Swiss requirements that 
address compliance officers and their responsibilities, compliance 
officer appointment, removal and compensation, related conflict of 
interest provisions and compliance-related reports. See Swiss 
Application section II.3.c at 90-109.
---------------------------------------------------------------------------

     Additional Exchange Act section 15F(j) requirements--
Additional requirements related to information-gathering pursuant to 
Exchange Act section 15F(j)(4)(A), and certain antitrust prohibitions 
specified by Exchange Act section 15F(j)(6).\73\
---------------------------------------------------------------------------

    \73\ Section 15F(j)(4)(A) particularly requires firms to have 
systems and procedures to obtain necessary information to perform 
functions required under section 15F. The Swiss Application in turn 
discusses Swiss provisions generally addressing information 
gathering and disclosure. See Swiss Application Section II.2 at 33. 
Section 15F(j)(6) prohibits firms from adopting any process or 
taking any action that results in any unreasonable restraint of 
trade, or to impose any material anticompetitive burden on trading 
or clearing. The Swiss Application addresses Swiss antitrust 
requirements. See Swiss Application section II.3.b at 78.
---------------------------------------------------------------------------

    Taken as a whole, these internal supervision, chief compliance 
officer and additional Exchange Act section 15F(j) requirements help to 
promote SBSEs' use of structures, processes and responsible personnel 
reasonably designed to promote compliance with applicable law, identify 
and cure instances of non-compliance and manage conflicts of interest.
    In proposing to provide conditional substituted compliance in 
connection with this part of the Swiss Application, the Commission 
preliminarily concluded that the relevant Swiss requirements in general 
would produce comparable regulatory outcomes by providing that Swiss 
SBSDs have structures and processes that reasonably are designed to 
promote compliance with applicable law and to identify and cure 
instances of non-compliance and manage conflicts of interest. 
Substituted compliance under the proposed Order was to be conditioned 
in part on SBSDs being subject to and complying with specified Swiss 
provisions that in the aggregate produce regulatory outcomes that are 
comparable to those associated with those internal supervision, 
compliance and related requirements under the Exchange Act.\74\
---------------------------------------------------------------------------

    \74\ See Swiss Substituted Compliance Notice and Proposed Order, 
86 FR at 45775-76.
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    Under the proposed Order, substituted compliance was to be subject 
to certain additional conditions to help ensure the comparability of 
regulatory outcomes. First, substituted compliance in connection with 
the

[[Page 57462]]

internal supervision requirements would be conditioned on the Covered 
Entities complying with applicable Swiss supervisory and compliance 
provisions as if those provisions also require the Covered Entities to 
comply with applicable requirements under the Exchange Act and the 
other conditions of the Order.\75\ This condition was intended to 
reflect that, even with substituted compliance, Covered Entities would 
still directly be subject to a number of requirements under the 
Exchange Act and conditions of the Order that fall outside the ambit of 
Swiss internal supervision and compliance requirements.\76\
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    \75\ In other words, the proposed Order would require that the 
Covered Entity's supervisory and compliance program cover the 
applicable requirements under the Exchange Act and other conditions 
of the Order.
    \76\ See id. at 45776. These residual Exchange Act requirements 
could, for example, relate to requirements for which substituted 
compliance is not available, requirements for which the Order does 
not make a positive substituted compliance determination, security-
based swap business for which the Covered Entity is unable to 
satisfy the conditions of the Order, and/or requirements or 
security-based swap business for which the Covered Entity decides 
not to use substituted compliance. The condition was designed to 
allow a Covered Entity to use their existing internal supervision 
and compliance frameworks to comply with the relevant Exchange Act 
requirements and Order conditions, rather than having to establish 
separate special-purpose supervision and compliance frameworks.
---------------------------------------------------------------------------

    For similar reasons, the proposed Order conditioned substituted 
compliance in connection with the compliance report requirements under 
Exchange Act section 15F(k)(3) and Exchange Act rule 15Fk-1(c) on the 
Covered Entity annually providing the Commission with certain 
compliance reports required pursuant to FINMA Circular 2017/1 margins 
78-81. Those reports must: (1) Be provided to the Commission at least 
annually and in the English language; (2) include a certification 
signed by the chief compliance officer or senior officer \77\ of the 
Covered Entity that, to the best of the certifier's knowledge and 
reasonable belief and under penalty of law, the report is accurate and 
complete in all material respects; (3) address the Covered Entity's 
compliance with applicable requirements under the Exchange Act and 
other applicable conditions of the proposed Order in connection with 
requirements for which the Covered Entity is relying on the proposed 
Order; (4) be provided to the Commission no later than 15 days 
following the earlier of the submission of the report to the Covered 
Entity's management body or the time the report is required to be 
submitted to the management body; and (5) together cover the entire 
period that the Covered Entity's annual compliance report referenced in 
Exchange Act section 15F(k)(3) and Exchange Act rule 15Fk-1(c) would be 
required to cover.\78\
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    \77\ See Exchange Act rule 15Fk-1(e)(2) (defining ``senior 
officer'' as ``the chief executive officer or other equivalent 
officer'').
    \78\ See Swiss Substituted Compliance Notice and Proposed Order, 
86 FR at 45776-77. The condition was designed to allow a Covered 
Entity to leverage the compliance reports that it must produce 
pursuant to Swiss requirements, by extending those reports to 
address compliance with the conditions to the proposed Order. In 
practice, a Covered Entity may satisfy this condition by identifying 
relevant Order conditions and reporting on the implementation and 
effectiveness of its controls with regard to compliance with those 
Order conditions.
---------------------------------------------------------------------------

    The Commission preliminarily did not provide substituted compliance 
for Exchange Act antitrust provisions, based on the preliminary 
conclusion that allowing an alternative means of compliance would not 
lead to comparable regulatory outcomes.\79\
---------------------------------------------------------------------------

    \79\ See id. at 45777.
---------------------------------------------------------------------------

B. Commenter Views and Final Provisions

    The Commission received one comment addressing the internal 
supervision, chief compliance officer and additional Exchange Act 
section 15F(j) requirements section of the proposed Order \80\ and 
other than modifying the order in response to the comment, is adopting 
it as proposed.\81\
---------------------------------------------------------------------------

    \80\ See Swiss Substituted Compliance Notice and Proposed Order, 
86 FR at 45775-77.
    \81\ See para. (c) of the Order.
---------------------------------------------------------------------------

    The commenter stated that two Swiss provisions included in 
paragraph (c)(3) of the proposed Order, BO articles 14e and 14g, would 
not apply to Covered Entities.\82\ The commenter also stated that the 
other provisions cited in paragraph (c)(3), in particular BO article 12 
and FINMA Circular 2017/1, were sufficient for a finding of 
comparability.\83\ With respect to BO article 14e, the Commission 
believes that the remaining provisions are duplicative and has 
therefore deleted the reference to BO article 14e.\84\ With respect to 
BO article 14g, however, the provisions cited do not clearly address 
conflicts of interest of associated persons, although the Swiss 
Application argues that those provisions do, in practice, lead to 
comparable outcomes.\85\ The Swiss Application, however, identified 
FinSA article 25,\86\ which addresses conflicts of interest to the same 
extent as article 14g, and is applicable to the Covered Entities, but 
only within Switzerland. The Commission believes it is therefore 
necessary to make two changes to address the deletion of BO article 
14g. First, the Commission has replaced BO article 14g with FinSA 
article 25 in paragraph (c)(3), but compliance with FinSA article 25 is 
only required when it is by its terms applicable (within 
Switzerland).\87\ In addition, consistent with the Swiss 
Application,\88\ the Commission has included a condition to BO article 
12 requiring that article 12(2) be applied in a manner to address the 
relevant conflicts of interest.\89\
---------------------------------------------------------------------------

    \82\ See Letter from Colin Lloyd of Cleary Gottlieb Steen & 
Hamilton LLP on behalf of UBS AG and Credit Suisse AG to Vanessa 
Countryman, Secretary, Commission, dated October 6, 2021 (``Swiss 
Firms' Letter II'').
    \83\ Id.
    \84\ See para. (c)(3) of the Order.
    \85\ See Swiss Application section II.3.d at 96 and Swiss Firms' 
Letter II.
    \86\ See Swiss Application section II.3.d at 96.
    \87\ See para. (c)(3) of the Order.
    \88\ See Swiss Application section II.3.d at 97-98.
    \89\ See para. (c)(3) of the Order.
---------------------------------------------------------------------------

    Consistent with the proposed Order, substituted compliance in 
connection with internal supervision further is conditioned on the 
Covered Entity being subject to and complying with the applicable Swiss 
supervisory and compliance provisions listed in paragraph (c)(3) of the 
Order, as if those provisions also require SBSDs to comply with 
applicable requirements under the Exchange Act and the other applicable 
conditions to the Order.\90\ Substituted compliance in connection with 
the chief compliance officer requirements further is conditioned on the 
compliance reports provided to the Commission addressing the SBSD's 
compliance with other applicable conditions of the Order.\91\ A Covered 
Entity that is unable to comply with an applicable condition--and thus 
is not eligible to use substituted compliance for the Exchange Act 
internal supervision and/or chief compliance officer requirements 
related to that condition--nevertheless may use substituted compliance 
for another set of Exchange Act requirements addressed in the Order if 
it complies with the conditions to the relevant parts of the Order.
---------------------------------------------------------------------------

    \90\ See para. (c)(4) of the Order. In other words, a Covered 
Entity's reliance on substituted compliance under para. (c)(4) 
requires that the Covered Entity's supervisory and compliance 
programs cover the applicable provisions under the Exchange Act and 
other conditions of the Order.
    \91\ See para. (c)(2)(ii) of the Order.
---------------------------------------------------------------------------

    Under the Order, substituted compliance for internal supervision 
and chief compliance officer requirements is not subject to a condition 
that the Covered Entity apply substituted compliance for related 
recordkeeping requirements in Exchange Act rules 18a-5 and 18a-6. A 
Covered Entity that

[[Page 57463]]

applies substituted compliance for internal supervision and/or chief 
compliance officer requirements, but does not apply substituted 
compliance for the related recordkeeping requirements in Exchange Act 
rules 18a-5 and 18a-6, will remain subject to the relevant provisions 
of Exchange Act rules 18a-5 and 18a-6. Those rules require the Covered 
Entity to make and preserve records of its compliance with Exchange Act 
internal supervision and chief compliance officer requirements and of 
its security-based swap activities required or governed by those 
requirements. A Covered Entity that applies substituted compliance for 
internal supervision and/or chief compliance officer requirements, but 
complies directly with related recordkeeping requirements in rules 18a-
5 and 18a-6, therefore must make and preserve records of its compliance 
with the relevant conditions of the Order and of its security-based 
swap activities required or governed by those conditions and/or 
referenced in the relevant parts of rules 18a-5 and 18a-6.
    Finally, the substituted compliance Order does not extend to 
antitrust provisions under the Exchange Act, as the Commission 
continues to believe that allowing an alternative means of compliance 
would not lead to outcomes comparable to the Exchange Act.\92\
---------------------------------------------------------------------------

    \92\ See Swiss Substituted Compliance Notice and Proposed Order, 
86 FR at 45777.
---------------------------------------------------------------------------

VI. Substituted Compliance for Recordkeeping, Reporting, and 
Notification Requirements

A. Proposed Approach

    The Swiss Application in part requested substituted compliance for 
requirements applicable to SBS Entities under the Exchange Act relating 
to:
     Record Making--Exchange Act rule 18a-5 requires prescribed 
records to be made and kept current.\93\
---------------------------------------------------------------------------

    \93\ See 17 CFR 240.18a-5. The Swiss Application discusses Swiss 
requirements that address firms' record creation obligations related 
to matters such as financial condition, operations, transactions, 
counterparties, and their property, personnel, and business conduct. 
See Swiss Application section II.2.a at 33-47.
---------------------------------------------------------------------------

     Record Preservation--Exchange Act rule 18a-6 requires 
preservation of records.\94\
---------------------------------------------------------------------------

    \94\ See 17 CFR 240.18a-6. The Swiss Application discusses Swiss 
requirements that address firms' record preservation obligations 
related to records that firms are required to create, as well as 
additional records such as records of communications. See Swiss 
Application section II.2.b at 48-61.
---------------------------------------------------------------------------

     Reporting--Exchange Act rule 18a-7 requires certain 
reports.\95\
---------------------------------------------------------------------------

    \95\ See 17 CFR 240.18a-7. The Swiss Application discusses Swiss 
requirements that address firms' obligations to make certain 
reports. See Swiss Application section II.2.c at 62-64.
---------------------------------------------------------------------------

     Notification--Exchange Act rule 18a-8 requires 
notification to the Commission when certain financial or operational 
problems occur.\96\
---------------------------------------------------------------------------

    \96\ See 17 CFR 240.18a-8. The Swiss Application discusses Swiss 
requirements that address firms' obligations to make certain 
notifications. See Swiss Application section II.2.c at 64-66.
---------------------------------------------------------------------------

     Daily Trading Records--Exchange Act section 15F(g) 
requires SBS Entities to maintain daily trading records.\97\
---------------------------------------------------------------------------

    \97\ See 15 U.S.C. 78o-10(g). The Swiss Application discusses 
Swiss requirements that address firms' record preservation 
obligations related to records that firms are required to create, as 
well as additional records such as records of communications. See 
Swiss Application section II.2.b at 50-52.
---------------------------------------------------------------------------

    Taken as a whole, the recordkeeping, reporting, and notification 
requirements that apply to SBS Entities are designed to promote the 
prudent operation of the firm's security-based swap activities, assist 
the Commission in conducting compliance examinations of those 
activities, and alert the Commission to potential financial or 
operational problems that could impact the firm and its customers.\98\
---------------------------------------------------------------------------

    \98\ Rule 3a71-6 sets forth additional analytic considerations 
in connection with substituted compliance for the Commission's 
recordkeeping, reporting, and notification requirements. In 
particular, Exchange Act rule 3a71-6(d)(6) provides that the 
Commission intends to consider (in addition to any conditions 
imposed) ``whether the foreign financial regulatory system's 
required records and reports, the timeframes for recording or 
reporting information, the accounting standards governing the 
records and reports, and the required format of the records and 
reports'' are comparable to applicable provisions under the Exchange 
Act, and whether the foreign provisions ``would permit the 
Commission to examine and inspect regulated firms' compliance with 
the applicable securities laws.''
---------------------------------------------------------------------------

B. Commenter Views and Final Provisions

1. General Considerations
    In proposing to provide conditional substituted compliance in 
connection with this part of the Swiss Application, the Commission 
preliminarily concluded that the relevant Swiss requirements, subject 
to conditions and limitations, would produce regulatory outcomes that 
are comparable to the outcomes associated with the vast majority of the 
recordkeeping, reporting, and notification requirements under the 
Exchange Act applicable to prudentially regulated SBS Entities pursuant 
to Exchange Act rules 18a-5, 18a-6, 18a-7, and 18a-8 and Exchange Act 
section 15F(g) (collectively, the ``recordkeeping, reporting, and 
notification requirements'').\99\ Substituted compliance for the 
recordkeeping, reporting, and notification requirements accordingly is 
conditioned on Covered Entities being subject to and complying with the 
Swiss provisions that in the aggregate establish a framework that 
produces outcomes comparable to those associated with the analogous 
recordkeeping, reporting, and notification requirements under the 
Exchange Act.\100\
---------------------------------------------------------------------------

    \99\ See Swiss Substituted Compliance Notice and Proposed Order, 
86 FR at 45777.
    \100\ See paras. (d)(1)(i)(A), (d)(1)(i)(B), (d)(1)(i)(C), 
(d)(1)(i)(D), (d)(1)(i)(E), (d)(1)(i)(F)(1), (d)(1)(i)(G), 
(d)(1)(i)(H), (d)(1)(i)(I)(1), (d)(1)(i)(J)(1), (d)(1)(i)(K)(1), 
(d)(2)(i)(A), (d)(2)(i)(B), (d)(2)(i)(C), (d)(2)(i)(D), 
(d)(2)(i)(E), (d)(2)(i)(F)(1), (d)(2)(i)(G)(1), (d)(2)(i)(H), 
(d)(2)(i)(I), (d)(2)(i)(J), (d)(2)(i)(K)(1), (d)(2)(i)(L), 
(d)(2)(i)(M), (d)(3)(i), (d)(3)(i)(B), (d)(4)(i)(A), (d)(4)(i)(B), 
and (d)(5) of the Order.
---------------------------------------------------------------------------

    The proposed structure of the substituted compliance determinations 
with respect to the recordkeeping, reporting, and notification 
requirements would have provided Covered Entities with greater 
flexibility to select distinct requirements within the broader rules 
for which they want to apply substituted compliance.\101\ This would 
not preclude a Covered Entity from applying substituted compliance for 
the entire rule (subject to conditions and limitations). However, it 
would permit the Covered Entity to apply substituted compliance with 
respect to certain requirements of a given rule and to comply directly 
with the remaining requirements. This more granular approach to the 
recordkeeping, reporting, and notification rules was intended to permit 
Covered Entities to leverage existing recordkeeping and reporting 
systems that are designed to comply with the broker-dealer 
recordkeeping and reporting requirements on which the recordkeeping, 
reporting, and notification requirements applicable to SBS Entities are 
based. For example, it may be more efficient for a Covered Entity to 
comply with certain Exchange Act requirements within a given 
recordkeeping, reporting, or notification rule (rather than apply 
substituted compliance) because it can utilize systems that its 
affiliated broker-dealer has implemented to comply with them. This 
proposed approach was consistent with the approach taken by the 
Commission in the French and UK Orders.\102\
---------------------------------------------------------------------------

    \101\ See Swiss Substituted Compliance Notice and Proposed 
Order, 86 FR at 45777-78.
    \102\ See French Substituted Compliance Order, 86 FR at 41649; 
UK Substituted Compliance Order, 86 FR at 43360.
---------------------------------------------------------------------------

    As applied to Exchange Act rules 18a-5 and 18a-6, this approach of 
providing greater flexibility resulted in preliminary substituted 
compliance determinations with respect to the different categories of 
records these

[[Page 57464]]

rules require SBS Entities to make, keep current, and/or preserve.\103\ 
The objective of these rules--taken as a whole--is to assist the 
Commission in monitoring and examining for compliance with substantive 
Exchange Act requirements applicable to SBS Entities (e.g., business 
conduct requirements) as well as to promote the prudent operation of 
these firms.\104\ The Commission stated a preliminary belief that the 
comparable Swiss recordkeeping rules achieve these outcomes with 
respect to compliance with substantive Swiss requirements for which 
preliminary positive substituted compliance determinations were being 
made (e.g., the preliminary positive substituted compliance 
determinations with respect to the Exchange Act business conduct 
requirements).\105\ At the same time, the recordkeeping rules address 
different categories of records through distinct requirements within 
the rules. Each requirement with respect to a specific category of 
records (e.g., paragraph (b)(2) of Exchange Act rule 18a-5 addressing 
ledger accounts) can be viewed in isolation as a distinct recordkeeping 
rule. Therefore, the Commission made preliminary substituted compliance 
determinations at this level of Exchange Act rules 18a-5 and 18a-
6.\106\ The Commission did not receive comment on this granular 
approach and is adopting it as proposed.\107\
---------------------------------------------------------------------------

    \103\ See Swiss Substituted Compliance Notice and Proposed 
Order, 86 FR at 45778.
    \104\ See, e.g., Exchange Act Release No. 71958 (Apr. 17, 2014), 
79 FR 25194, 25199-200 (May 2, 2014).
    \105\ See Swiss Substituted Compliance Notice and Proposed 
Order, 86 FR at 45778.
    \106\ See Swiss Substituted Compliance Notice and Proposed 
Order, 86 FR at 45778.
    \107\ See paras. (d)(1)(i) and (d)(2)(ii) of the Order.
---------------------------------------------------------------------------

    Second, the Commission did not make a preliminary positive 
substituted compliance determination with respect to a discrete 
provision of the recordkeeping, reporting, and notification 
requirements if it was fully or partially linked to a substantive 
Exchange Act requirement for which substituted compliance was not 
available or for which a preliminary positive substituted compliance 
determination was not being made.\108\ In particular, a preliminary 
positive substituted compliance determination was not made, in full or 
in part, for recordkeeping, reporting, or notification requirements 
linked to the following Exchange Act rules for which substituted 
compliance is not available or a preliminary positive substituted 
compliance determination was not made: (1) Exchange Act rule 15Fh-4; 
(2) Exchange Act rule 15Fh-5; (3) Exchange Act rule 15Fh-6; (4) 
Exchange Act rule 18a-4; (5) Regulation SBSR; (6) Form SBSE and its 
variations; (7) Exchange Act rule 15Fh-1; (8) Exchange Act rule 15Fh-2; 
and (9) Exchange Act rule 15Fi-5. This proposed approach was consistent 
with the approach taken by the Commission in the French and UK 
Orders.\109\ The Commission did not receive comment on these 
limitations and the Order includes them.\110\
---------------------------------------------------------------------------

    \108\ See Swiss Substituted Compliance Notice and Proposed 
Order, 86 FR at 45778 (discussing this limitation).
    \109\ See French Substituted Compliance Order, 86 FR at 41650; 
UK Substituted Compliance Order, 86 FR at 45778.
    \110\ See para. (d) of the Order.
---------------------------------------------------------------------------

    Third, the Commission conditioned substituted compliance with 
discrete provisions of the recordkeeping, reporting, and notification 
requirements that were fully or partially linked to a substantive 
Exchange Act requirement for which substituted compliance was available 
on the Covered Entity applying substituted compliance with respect to 
the linked Exchange Act requirement.\111\ In particular, substituted 
compliance for a provision of the recordkeeping, reporting, and 
notification requirements that is linked to the following Exchange Act 
rules was conditioned on the SBS Entity applying substituted compliance 
to the linked substantive Exchange Act rule: (1) Exchange Act rule 
15Fh-3(h); (2) Exchange Act rule 15Fi-2; (3) Exchange Act rule 15Fi-3; 
(4) Exchange Act rule 15Fi-4; and (5) Exchange Act rule 15Fk-1. The 
Commission did not receive comment on these conditions and the Order 
includes them.\112\
---------------------------------------------------------------------------

    \111\ See Swiss Substituted Compliance Notice and Proposed 
Order, 86 FR at 18395 (discussing this condition).
    \112\ See para. (d)(3) of the Order.
---------------------------------------------------------------------------

    Fourth, the Commission conditioned substituted compliance with 
Exchange Act rule 18a-7 on Covered Entities filing periodic unaudited 
financial and operational information with the Commission or its 
designee in the manner and format required by Commission rule or 
order.\113\ The Commission did not receive comment on this condition 
and the Order includes it.\114\
---------------------------------------------------------------------------

    \113\ See Swiss Substituted Compliance Notice and Proposed 
Order, 86 FR at 45782 (discussing this condition).
    \114\ See para. (d)(3) of the Order.
---------------------------------------------------------------------------

    Fifth, the proposed Order conditioned substituted compliance with 
Exchange Act rule 18a-8 on Covered entities simultaneously sending a 
copy of any notice required to be sent by Swiss law to the Commission 
in the manner specified on the Commission's website and including with 
the transmission the contact information of an individual who can 
provide further information about the matter that is the subject of the 
notice.\115\ The Commission did not receive comment on these conditions 
and the Order includes them.\116\
---------------------------------------------------------------------------

    \115\ See Swiss Substituted Compliance Notice and Proposed 
Order, 86 FR at 45782 (discussing this condition).
    \116\ See para. (d)(4)(ii)(A) of the Order.
---------------------------------------------------------------------------

    Sixth, the proposed Order included a condition that Covered 
Entities must promptly furnish to a representative of the Commission 
upon request an English translation of any record, report, or 
notification of the Covered Entity that is required to be made, 
preserved, filed, or subject to examination pursuant to Exchange Act 
section 15F of this Order.\117\ The Commission did not receive a 
comment on this condition and the Order includes it.\118\
---------------------------------------------------------------------------

    \117\ See Swiss Substituted Compliance Notice and Proposed 
Order, 86 FR at 45784 (discussing this condition).
    \118\ See para. (d)(7) of the Order.
---------------------------------------------------------------------------

2. Citations to Swiss Law
    The Commission received comment recommending changes to the 
proposed Order to refine the scope of Swiss law provisions that would 
operate as conditions to substituted compliance.\119\ The Commission 
staff reviewed each of the Swiss law citations that the commenter 
recommended adding or removing from the Order for relevance to the 
comparable Exchange Act requirement while also keeping in mind that 
each Swiss law citation was included in the Swiss Application 
intentionally. The Commission's conclusion and reasoning with respect 
to the commenter's recommendations are discussed in further detail 
below.
---------------------------------------------------------------------------

    \119\ See Swiss Firms' Letter at Annex.
---------------------------------------------------------------------------

    First, the commenter recommended replacing references to FMIO 
article 38 with FinMIA article 38 in paragraphs (d)(1)(i)(E) and 
(d)(1)(i)(G) of the Order, because FinMIA article 38 covers 
recordkeeping duties of Covered Entities while FMIO article 38 is a 
provision that applies to organized trading facilities. The Commission 
agrees with the commenter's reasoning and is therefore replacing 
references to FMIO article 38 with FinMIA article 38 in paragraphs 
(d)(1)(i)(E) and (d)(1)(i)(G) of the Order.\120\
---------------------------------------------------------------------------

    \120\ Compare paras. (d)(1)(i)(E) and (d)(1)(i)(G) of the Swiss 
Substituted Compliance Notice and Proposed Order, with paras. 
(d)(1)(i)(E) and (d)(1)(i)(G) of the Order.
---------------------------------------------------------------------------

    Second, the commenter recommended deleting from paragraphs 
(d)(1)(i)(H) and (d)(2)(i)(H) of the Order references to CO article 
330a, which provides for an employee's right to obtain a letter of

[[Page 57465]]

recommendation, reasoning that this Swiss law provision does not 
directly apply to records, and that this provision only concerns rights 
arising out of employment relationships under Swiss law and is not 
applicable outside of Switzerland. Even though CO article 330a is not a 
direct recordkeeping requirement, in practice it requires Swiss firms 
to maintain employment records that are relevant to Exchange Act rules 
18a-5(b)(8) and 18a-6(d)(1), so the Commission is not removing 
references to this requirement from the Order's list of Swiss 
requirements comparable to Exchange Act rules 18a-5(b)(8) and 18a-
6(d)(1).\121\
---------------------------------------------------------------------------

    \121\ Compare paras. (d)(1)(i)(H) and (d)(2)(i)(H) of the Swiss 
Substituted Compliance Notice and Proposed Order, with paras. 
(d)(1)(i)(H) and (d)(2)(i)(H) of the Order.
---------------------------------------------------------------------------

    Third, the commenter recommended deleting from paragraph 
(d)(2)(i)(G)(1) of the Order references to CO article 686, which 
requires firms to preserve a register of registered shares for ten 
years, reasoning that this Swiss law provision only applies to shares 
of companies incorporated in Switzerland. The Commission expects the 
firms relying on the Order to be incorporated in Switzerland, so the 
Commission is not removing references to this requirement from the 
Order's list of Swiss requirements comparable to Exchange Act rules 
18a-6(c).\122\
---------------------------------------------------------------------------

    \122\ Compare para. (d)(2)(i)(G)(1) of the Swiss Substituted 
Compliance Notice and Proposed Order, with para. (d)(2)(i)(G)(1) of 
the Order.
---------------------------------------------------------------------------

    Fourth, the commenter recommended replacing references to FINMA 
Circular 2008/21 margin 131 with FINMA Circular 2008/21 margin 132 in 
paragraph (d)(2)(i)(I) of the Order, because the Swiss Application 
inadvertently cited to a repealed provision of Swiss law. The 
Commission agrees with the commenter's reasoning and is therefore 
replacing FINMA Circular 2008/21 margin 131 with FINMA Circular 2008/21 
margin 132 in paragraph (d)(2)(i)(I) of the Order.\123\
---------------------------------------------------------------------------

    \123\ Compare para. (d)(2)(i)(I) of the Swiss Substituted 
Compliance Notice and Proposed Order, with para. (d)(2)(i)(I) of the 
Order.
---------------------------------------------------------------------------

VII. Supervisory and Enforcement Considerations

A. Proposed Approach

    Exchange Act rule 3a71-6(a)(2)(i) provides that the Commission's 
assessments regarding the comparability of foreign requirements in part 
should take into account ``the effectiveness of the supervisory program 
administered, and the enforcement authority exercised'' by the foreign 
financial regulatory authority. This provision is intended to help 
ensure that substituted compliance is not predicated on rules that 
appear high-quality on paper if market participants in practice are 
allowed to fall short of their obligations, while also recognizing that 
differences among supervisory and enforcement regimes should not be 
assumed to reflect flaws in one regime or another. The Swiss 
Application accordingly included information regarding the supervisory 
and enforcement framework applicable to derivatives markets and market 
participants in Switzerland.
    In proposing to grant substituted compliance in connection with the 
Swiss Application, the Commission preliminarily concluded that the 
relevant supervisory and enforcement considerations were consistent 
with substituted compliance. That preliminary conclusion took into 
account information regarding FINMAs practices supervising Covered 
Firms located in Switzerland, as well as their enforcement-related 
authority and practices.\124\
---------------------------------------------------------------------------

    \124\ See Swiss Substituted Compliance Notice and Proposed 
Order, 86 FR at 45784-85.
---------------------------------------------------------------------------

B. Commenter Views and Final Provisions

    Commenters did not address the Commission's preliminary conclusions 
regarding supervisory and enforcement considerations, and the 
Commission continues to conclude that the relevant supervisory and 
enforcement considerations in Switzerland are consistent with 
substituted compliance. In particular, based on the available 
information regarding FINMA's authority and practices to oversee market 
participants' compliance with applicable requirements and to take 
action in the event of violations, the Commission remains of the view 
that, consistent with rule 3a71-6, comparability determinations reflect 
Swiss requirements as they apply in practice.
    To be clear, the supervisory and enforcement considerations 
addressed by rule 3a71-6 do not mandate that the Commission make 
judgments regarding the comparative merits of U.S. and foreign 
supervisory and enforcement frameworks, or to require specific findings 
regarding the supervisory and enforcement effectiveness of a foreign 
regime. The rule 3a71-6 considerations regarding supervisory and 
enforcement effectiveness instead address whether comparability 
analyses related to substituted compliance reflect requirements that 
market participants must follow, and for which market participants are 
subject to enforcement consequences in the event of violations. Those 
considerations are satisfied here.

VIII. Conclusion

    It is hereby determined and ordered, pursuant to rule 3a71-6 under 
the Exchange Act, that a Covered Entity (as defined in paragraph (e)(1) 
of this Order) may satisfy the requirements under the Exchange Act that 
are addressed in paragraphs (b) through (d) of this Order so long as 
the Covered Entity is subject to and complies with relevant 
requirements of the Swiss Confederation and with the conditions to this 
Order, as amended or superseded from time to time.

(a) General Conditions

    This Order is subject to the following general conditions, in 
addition to the conditions specified in paragraphs (b) through (d):
    (1) Security-based swaps and transactions as ``derivatives'' or 
``derivative transactions.'' For each condition in paragraphs (b) 
through (d) of this Order that requires the application of, and the 
Covered Entity's compliance with, provisions of FinMIA and FMIO, the 
relevant security-based swaps and security-based swap transactions are 
``derivatives'' and/or ``derivative transactions'' for purposes of 
FinMIA article 2(c), or otherwise are described by the relevant 
language of that provision.
    (2) ``Counterparty'' status. For each condition in paragraph (b) 
through (d) of this Order that requires the application of, and the 
Covered Entity's compliance with, the provisions of FinMIA and FMIO, 
the Covered Entity complies with the applicable conditions of the Order 
regardless of whether the Covered Entity's counterparty is a 
``counterparty'' for purposes of FinMIA article 93, or otherwise is 
described by the relevant language of that provision.
    (3) Counterparty's status as ``company.'' For each condition in 
paragraph (b) through (d) of this Order that requires the application 
of, and the Covered Entity's compliance with, the provisions of FMIO, 
the Covered Entity complies with the applicable conditions of the Order 
regardless of whether a Covered Entity's counterparty is a ``company'' 
for purposes of FMIO article 77, or otherwise is described by the 
relevant language of that provision.
    (4) Covered Entity as ``bank.'' For each condition in paragraph (b) 
through (d) of this Order that requires the application of, and the 
Covered Entity's compliance with, the provisions of the BA and BO and/
or other Swiss requirements adopted pursuant to those provisions, the 
Covered Entity is a ``bank'' for

[[Page 57466]]

purposes of BA article 1a, or otherwise is described by the relevant 
language of that provision.
    (5) Covered Entity as ``systemically important.'' For each 
condition in paragraph (b) through (d) of this Order that requires the 
application of, and the Covered Entity's compliance with, the 
provisions of the FINMA Circular 2017/1, the Covered Entity is 
``systemically important'' for purposes of BA article 8(3) and article 
9, or otherwise are described by the relevant language of that 
provision.
    (6) Covered Entity as ``category 1.'' For each condition in 
paragraph (b) through (d) of this Order that requires the application 
of, and the Covered Entity's compliance with, the provisions of FINMA 
Circular 2017/1, the Covered Entity is supervised as ``category 1,'' as 
defined in BO articles 2(2) and 2(3) and BO Annex 3, or otherwise is 
described by the relevant language of those provisions.
    (7) ``Institution-specific approach'' to operational risk 
quantification. For each condition in paragraphs (b) through (d) of 
this Order that requires the application of, and the Covered Entity's 
compliance with, the provisions of FINMA Circular 2008/21 margins 45-
107, the Covered Entity applies the institution-specific approach, as 
defined in CAO article 94, to quantifying capital requirements for 
operational risk, as approved by FINMA.
    (8) Memorandum of Understanding with FINMA. The Commission and 
FINMA have a supervisory and enforcement memorandum of understanding 
and/or other arrangement addressing cooperation with respect to this 
Order at the time the Covered Entity complies with the relevant 
requirements under the Exchange Act via compliance with one or more 
provisions of this Order.
    (9) Notice to Commission. A Covered Entity relying on this Order 
must provide notice of its intent to rely on this Order by notifying 
the Commission in writing. Such notice must be sent to an email address 
provided on the Commission's website. The notice must include the 
contact information of an individual who can provide further 
information about the matter that is the subject of the notice. The 
notice must identify each specific substituted compliance determination 
within paragraphs (b) through (d) of the Order for which the Covered 
Entity intends to apply substituted compliance. A Covered Entity must 
promptly provide an amended notice if it modifies its reliance on the 
substituted compliance determinations in this Order.
    (10) Notification Requirements Related to Changes in Capital. A 
Covered Entity that is prudentially regulated relying on this Order 
must apply substituted compliance with respect to the requirements of 
Exchange Act rule 18a-8(c) and the requirements of Exchange Act rule 
18a-8(h) as applied to Exchange Act rule 18a-8(c).

(b) Substituted Compliance in Connection With Risk Control Requirements

    This Order extends to the following provisions related to risk 
control:
    (1) Internal risk management. The requirements of Exchange Act 
section 15F(j)(2) and relevant aspects of Exchange Act rule 15Fh-
3(h)(2)(iii)(I), provided that the Covered Entity is subject to and 
complies with the requirements of: BO article 12; FINMA Circular 2017/1 
margins 9-14, 31-49, 52-76, 82-97; and FINMA Circular 2008/21 margins 
45, 54-63, 65-68, 117-138.
    (2) Trade acknowledgement and verification. The requirements of 
Exchange Act rule 15Fi-2, provided that the Covered Entity is subject 
to and complies with the requirements of FinMIA articles 108(a) and 
(c); and FMIO articles 95, 97, and 113(1).
    (3) Portfolio reconciliation. The requirements of Exchange Act rule 
15Fi-3, other than paragraph (c) to that rule, provided that:
    (i) The Covered Entity is subject to and complies with the 
requirements of FINMASA article 29; FinMIA article 108(b) and (c); and 
FMIO articles 96, 97 and 113(1)(d);
    (ii) The Covered Entity does not apply FinMIA article 108(b)'s 
exception for ``small non-financial counterparties'' as defined in 
FinMIA article 98.
    (4) Portfolio compression. The requirements of Exchange Act rule 
15Fi-4, provided that:
    (i) The Covered Entity is subject to and complies with the 
requirements of FinMIA article 108(d); and FMIO articles 98 and 
113(1)(d); and
    (ii) The Covered Entity does not apply the portion of FinMIA 
article 108(d) that excludes application of the requirement when there 
are fewer than 500 non-centrally cleared OTC derivatives transactions 
outstanding.

(c) Substituted Compliance in Connection With Internal Supervision and 
Compliance Requirements and Certain Exchange Act Section 15F(j) 
Requirements

    This Order extends to the following provisions related to internal 
supervision and compliance and Exchange Act section 15F(j) 
requirements:
    (1) Internal supervision. The requirements of Exchange Act rule 
15Fh-3(h) and Exchange Act sections 15F(j)(4)(A) and (j)(5), provided 
that:
    (i) The Covered Entity is subject to and complies with the 
requirements identified in paragraph (c)(3) of this Order; and
    (ii) This paragraph (c) does not extend to the requirements of 
paragraph (h)(2)(iii)(I) to rule 15Fh-3 to the extent those 
requirements pertain to compliance with Exchange Act sections 
15F(j)(2), (j)(3), (j)(4)(B) and (j)(6), or to the general and 
supporting provisions of paragraph (h) to rule 15Fh-3 in connection 
with those Exchange Act sections.
    (2) Chief compliance officers. The requirements of Exchange Act 
section 15F(k) and Exchange Act rule 15Fk-1, provided that:
    (i) The Covered Entity complies with the requirements identified in 
paragraph (c)(3) of this Order;
    (ii) All reports required pursuant to FINMA Circular 2017/1 margins 
78-81 must also:
    (A) Be provided to the Commission at least annually, and in the 
English language;
    (B) Include a certification signed by the chief compliance officer 
or senior officer (as defined in Exchange Act rule 15Fk-1(e)(2)) of the 
Covered Entity that, to the best of the certifier's knowledge and 
reasonable belief and under penalty of law, the report is accurate and 
complete in all material respects;
    (C) Address the firm's compliance with:
    (i) Applicable requirements under the Exchange Act; and
    (ii) The other applicable conditions to this Order in connection 
with requirements for which the Covered Entity is relying on this 
Order;
    (D) Be provided to the Commission no later than 15 days following 
the earlier of:
    (i) The submission of the report to the Covered Entity's management 
body; or
    (ii) The time the report is required to be submitted to the 
management body; and
    (E) Together cover the entire period that the Covered Entity's 
annual compliance report referenced in Exchange Act section 15F(k)(3) 
and Exchange Act rule 15Fk-1(c) would be required to cover.
    (3) Applicable supervisory and compliance requirements. Paragraphs 
(c)(1) and (c)(2) are conditioned on the Covered Entity being subject 
to and complying with the following requirements: BA articles 3(2)(c) 
and 3f;

[[Page 57467]]

BO article 12 (provided that the application of BO article 12(2) 
includes procedures reasonably designed to address conflicts of 
interest that may be present with respect to associated persons being 
supervised); FINMA Circular 2017/1 articles 9-97; FINMA Circular 2008/
21 margins 54-62, 65-68, 121-122, and 128-136.5; FINMA Circular 2013/8 
margins 45-61, 64; FINMA Circular 2010/1 margins 16-74; FINMA Circular 
2018/3 margins 14-35; and (where applicable) FinSA article 25.
    (4) Additional condition to paragraph (c)(1). Paragraph (c)(1) 
further is conditioned on the requirement that the Covered Entity 
complies with the provisions specified in paragraph (c)(3) as if those 
provisions also require compliance with:
    (i) Applicable requirements under the Exchange Act; and
    (ii) The other applicable conditions to this Order in connection 
with requirements for which the Covered Entity is relying on this 
Order.

(d) Substituted Compliance in Connection With Recordkeeping, Reporting, 
and Notification Requirements

    This Order extends to the following provisions that apply to a 
Covered Entity related to recordkeeping, reporting, and notification:
    (1)(i) Make and keep current certain records. The requirements of 
the following provisions of Exchange Act rule 18a-5, provided that the 
Covered Entity complies with the relevant conditions in this paragraph 
(d)(1)(i) and with the applicable conditions in paragraph (d)(1)(ii):
    (A) The requirements of Exchange Act rule 18a-5(b)(1), provided 
that the Covered Entity is subject to and complies with the 
requirements of FMIO-FINMA article 1; FinMIA articles 104 and 106; FMIO 
annex 2; CO article 958f;
    (B) The requirements of Exchange Act rule 18a-5(b)(2), provided 
that the Covered Entity is subject to and complies with the 
requirements of CO article 958f; AccO article 1; FinMIA article 106;
    (C) The requirements of Exchange Act rule 18a-5(b)(3), provided 
that the Covered Entity is subject to and complies with the 
requirements of CO article 958f; FinMIA articles 104 and 106; FMIO 
annex 2;
    (D) The requirements of Exchange Act rule 18a-5(b)(4), provided 
that the Covered Entity is subject to and complies with the 
requirements of FinMIA article 38; FMIO article 36; FinIA article 50; 
FMIO-FINMA article 1; CO article 958f;
    (E) The requirements of Exchange Act rule 18a-5(b)(5), provided 
that the Covered Entity is subject to and complies with the 
requirements of FinMIA article 38; FinIA article 50; FMIO-FINMA article 
1; CO article 958f;
    (F) The requirements of Exchange Act rules 18a-5(b)(6) and (b)(11), 
provided that:
    (1) The Covered Entity is subject to and complies with the 
requirements of FinMIA articles 106 and 108(a); FMIO article 95; CO 
article 958f; and
    (2) The Covered Entity applies substituted compliance for the 
requirements of Exchange Act rule 15Fi-2 pursuant to this Order;
    (G) The requirements of Exchange Act rule 18a-5(b)(7), provided 
that the Covered Entity is subject to and complies with the 
requirements of FinMIA article 38; FinIA article 50; FMIO-FINMA article 
1; FMIO annex 2; FinMIA articles 104 and 106; AMLA article 3; CO 
article 958f;
    (H) The requirements of Exchange Act rule 18a-5(b)(8), provided 
that the Covered Entity is subject to and complies with the 
requirements of CO article 958f; BA article 3; BO article 12; CO 
article 330a; FINMA Circular 2008/21, Annex 3, margins 30-33;
    (I) The requirements of Exchange Act rule 18a-5(b)(13), regarding 
one or more provisions of Exchange Act rules 15Fh-3 or 15Fk-1 for which 
substituted compliance is available under this Order, provided that:
    (1) The Covered Entity is subject to and complies with the 
requirements of FINMA Circular 2017/1; BA article 3; CO article 958f, 
in each case with respect to the relevant security-based swap or 
activity;
    (2) With respect to the portion of Exchange Act rule 18a-5(b)(13) 
that relates to one or more provisions of Exchange Act rule 15Fh-3 for 
which substituted compliance is available under this Order, the Covered 
Entity applies substituted compliance for such business conduct 
standard(s) of Exchange Act rule 15Fh-3 pursuant to this Order, as 
applicable, with respect to the relevant security-based swap or 
activity; and
    (3) With respect to the portion of Exchange Act rule 18a-5(b)(13) 
that relates to Exchange Act rule 15Fk-1, the Covered Entity applies 
substituted compliance for Exchange Act section 15F(k) and Exchange Act 
rule 15Fk-1 pursuant to this Order;
    (J) The requirements of Exchange Act rule 18a-5(b)(14)(i) and (ii), 
provided that:
    (1) The Covered Entity is subject to and complies with the 
requirements of FinMIA articles 104 and 106; CO article 958f; and
    (2) The Covered Entity applies substituted compliance for Exchange 
Act rule 15Fi-3 pursuant to this Order; and
    (K) The requirements of Exchange Act rule 18a-5(b)(14)(iii), 
provided that:
    (1) The Covered Entity is subject to and complies with the 
requirements of FinMIA articles 104 and 106; CO article 958f; and
    (2) The Covered Entity applies substituted compliance for Exchange 
Act rule 15Fi-4 pursuant to this Order.
    (ii) Paragraph (d)(1)(i) is subject to the following further 
conditions:
    (A) Paragraphs (d)(1)(i)(A) through (C) and (G) are subject to the 
condition that the Covered Entity preserves all of the data elements 
necessary to create the records required by the applicable Exchange Act 
rules cited in such paragraphs and upon request furnishes promptly to 
representatives of the Commission the records required by those rules;
    (B) A Covered Entity may apply the substituted compliance 
determination in paragraph (d)(1)(i)(I) to records of compliance with 
Exchange Act rule 15Fh-3(h) in respect of one or more security-based 
swaps or activities related to security-based swaps; and
    (C) This Order does not extend to the requirements of Exchange Act 
rule 18a-5(b)(9), (b)(10), or (b)(12).
    (2)(i) Preserve certain records. The requirements of the following 
provisions of Exchange Act rule 18a-6, provided that the Covered Entity 
complies with the relevant conditions in this paragraph (d)(2)(i) and 
with the applicable conditions in paragraph (d)(2)(ii):
    (A) The requirements of Exchange Act rule 18a-6(a)(2), provided 
that the Covered Entity is subject to and complies with the 
requirements of FinMIA article 106; CO article 958f; FMIO-FINMA article 
1(4); AccO article 3; FINMA Circular 2008/4 Marg. 16;
    (B) The requirements of Exchange Act rule 18a-6(b)(2)(i), provided 
that the Covered Entity is subject to and complies with the 
requirements of FinMIA article 106; CO article 958f; FMIO-FINMA article 
1(4); AccO article 3; FINMA Circular 2008/4 Marg. 16;
    (C) The requirements of Exchange Act rule 18a-6(b)(2)(ii), provided 
that the Covered Entity is subject to and complies with the 
requirements of CO article 958f; FINMA Circular 2013/8 Marg. 60 and 
Marg. 61;
    (D) The requirements of Exchange Act rule 18a-6(b)(2)(iii), 
provided that the Covered Entity is subject to and complies with the 
requirements of CO

[[Page 57468]]

article 958f; AMLA article 7(3); AMLO-FINMA article 5(1);
    (E) The requirements of Exchange Act rule 18a-6(b)(2)(iv), provided 
that the Covered Entity is subject to and complies with the 
requirements of CO article 958f; FINMA Circular 2013/8 Marg. 60 and 
Marg. 61;
    (F) The requirements of Exchange Act rule 18a-6(b)(2)(vii), 
regarding one or more provisions of Exchange Act rules 15Fh-3 or 15Fk-1 
for which substituted compliance is available under this Order, 
provided that:
    (1) The Covered Entity is subject to and complies with the 
requirements of FINMA Circular 2017/1; BA article 3; CO article 958f, 
in each case with respect to the relevant security-based swap or 
activity;
    (2) With respect to the portion of Exchange Act rule 18a-
6(b)(2)(vii) that relates to one or more provisions of Exchange Act 
rule 15Fh-3 for which substituted compliance is available under this 
Order, the Covered Entity applies substituted compliance for such 
business conduct standard(s) of Exchange Act rule 15Fh-3 pursuant to 
this Order, as applicable, with respect to the relevant security-based 
swap or activity; and
    (3) With respect to the portion of Exchange Act rule 18a-
6(b)(2)(vii) that relates to Exchange Act rule 15Fk-1, the Covered 
Entity applies substituted compliance for Exchange Act section 15F(k) 
and Exchange Act rule 15Fk-1 pursuant to this Order;
    (G) The requirements of Exchange Act rule 18a-6(c), provided that:
    (1) The Covered Entity is subject to and complies with the 
requirements of BA article 3; BO article 12; CO articles 686 and 958f; 
and
    (2) This Order does not extend to the requirements of Exchange act 
rule 18a-6(c) relating to Forms SBSE, SBSE-A, SBSE-C, SBSE-W, all 
amendments to these forms, and all other licenses or other 
documentation showing the registration of the Covered Entity with any 
securities regulatory authority or the U.S. Commodity Futures Trading 
Commission;
    (H) The requirements of Exchange Act rule 18a-6(d)(1), provided 
that the Covered Entity is subject to and complies with the 
requirements of CO article 958f; BA article 3; BO article 12; CO 
article 330a; FINMA Circular 2008/21, Annex 3, margins 30-33;
    (I) The requirements of Exchange Act rule 18a-6(d)(2)(ii), provided 
that the Covered Entity is subject to and complies with the 
requirements of BA article 3; BO article 12; CO article 958f; FINMA 
Circular 2008/21 margins 122, 128, 132, and Appendix 2;
    (J) The requirements of Exchange Act rule 18a-6(d)(3)(ii), provided 
that the Covered Entity is subject to and complies with the 
requirements of CO article 958f; BA article 3; BO article 12;
    (K) The requirements of Exchange Act rule 18a-6(d)(4) and (d)(5), 
regarding one or more provisions of Exchange Act rules 15Fi-3 or 15Fi-4 
for which substituted compliance is available under this Order, 
provided that:
    (1) The Covered Entity is subject to and complies with the 
requirements of CO article 958f; FinMIA article 106;
    (2) With respect to the portion of Exchange Act rule 18a-6(d)(4) 
and (d)(5) that relates to Exchange Act rules 15Fi-3 or 15Fi-4, the 
Covered Entity applies substituted compliance for Exchange Act rules 
15Fi-3 and 15Fi-4 pursuant to this Order; and
    (3) This Order does not extend to the requirements of Exchange Act 
rule 18a-6(d)(4) and (d)(5) relating to Exchange Act rule 15Fi-5;
    (L) The requirements of Exchange Act rule 18a-6(e), provided that 
the Covered Entity is subject to and complies with the requirements of 
AccO; and
    (M) The requirements of Exchange Act rule 18a-6(f), provided that 
the Covered Entity is subject to and complies with the requirements of 
FINMA Circular 2018/3.
    (ii) Paragraph (d)(2)(i) is subject to the following further 
conditions:
    (A) A Covered Entity may apply the substituted compliance 
determination in paragraph (d)(2)(i)(F) to records related to Exchange 
Act rule 15Fh-3(h) in respect of one or more security-based swaps or 
activities related to security-based swaps; and
    (B) This Order does not extend to the requirements of Exchange Act 
rule 18a-6(b)(2)(v), (b)(2)(vi), or (b)(2)(viii).
    (3) File Reports. The requirements of Exchange Act rule 18a-7(a)(2) 
and the requirements of Exchange Act rule 18a-7(j) as applied to the 
requirements of Exchange Act rule 18a-7(a)(2), provided that:
    (i) The Covered Entity is subject to and complies with the 
requirements of BA article 6a; BO article 32; CAO article 16; FINMA 
Circular 2020/1; and FINMA Circular 2016/1; and
    (ii) The Covered Entity files periodic unaudited financial and 
operational information with the Commission or its designee in the 
manner and format required by Commission rule or order and presents the 
financial information in the filing in accordance with generally 
accepted accounting principles that the Covered Entity uses to prepare 
general purpose publicly available or available to be issued financial 
statements in Switzerland.
    (4)(i) Provide Notification. The requirements of the following 
provisions of Exchange Act rule 18a-8, provided that the Covered Entity 
complies with the relevant conditions in this paragraph (d)(4)(i) and 
with the applicable conditions in paragraph (d)(4)(ii):
    (A) The requirements of Exchange Act rule 18a-8(c) and the 
requirements of Exchange Act rule 18a-8(h) as applied to the 
requirements of Exchange Act rule 18a-8(c), provided that the Covered 
Entity is subject to and complies with the requirements of FINMASA 
article 29(2); CAO articles 14, 42(3), 101, and 130(4); and Liquidity 
Ordinance articles 17b, and 26(2).
    (B) The requirements of Exchange Act rule 18a-8(d) and the 
requirements of Exchange Act rule 18a-8(h) as applied to the 
requirements of Exchange Act rule 18a-8(d), provided that:
    (1) The Covered Entity is subject to and complies with the 
requirements of FINMASA article 29(2); CAO articles 14, 42(3), 101, and 
130(4); and Liquidity Ordinance articles 17b, and 26(2); and
    (2) This Order does not extend to the requirements of Exchange Act 
rule 18a-8(d) to give notice with respect to books and records required 
by Exchange Act rule 18a-5 for which the Covered Entity does not apply 
substituted compliance pursuant to this Order;
    (ii) Paragraph (d)(4)(i) is subject to the following further 
conditions:
    (A) The Covered Entity:
    (1) Simultaneously sends a copy of any notice required to be sent 
by Swiss law cited in this paragraph of the Order to the Commission in 
the manner specified on the Commission's website; and
    (2) Includes with the transmission the contact information of an 
individual who can provide further information about the matter that is 
the subject of the notice; and
    (B) This Order does not extend to the requirements of paragraph (g) 
of rule 18a-8 or to the requirements of Exchange Act rule 18a-8(h) as 
applied to such requirements.
    (5) Daily Trading Records. The requirements of Exchange Act section 
15F(g), provided that the Covered Entity is subject to and complies 
with the requirements of CO article 958f; FMIO article 36; FMIO-FINMA 
article 1; FinMIA articles 38, 104, and 106; FINMA Circular 2013/8 
marg. 60 and marg. 61.
    (6) Examination and Production of Records. Notwithstanding the 
forgoing provisions of paragraph (d) of this Order, this Order does not 
extend to, and Covered Entities remain subject to, the requirement of 
Exchange Act section

[[Page 57469]]

15F(f) to keep books and records open to inspection by any 
representative of the Commission and the requirement of Exchange Act 
rule 18a-6(g) to furnish promptly to a representative of the Commission 
legible, true, complete, and current copies of those records of the 
Covered Entity that are required to be preserved under Exchange Act 
rule 18a-6, or any other records of the Covered Entity that are subject 
to examination or required to be made or maintained pursuant to 
Exchange Act section 15F that are requested by a representative of the 
Commission.
    (7) English Translations. Notwithstanding the forgoing provisions 
of paragraph (d) of this Order, to the extent documents are not 
prepared in the English language, Covered Entities must promptly 
furnish to a representative of the Commission upon request an English 
translation of any record, report, or notification of the Covered 
Entity that is required to be made, preserved, filed, or subject to 
examination pursuant to Exchange Act section 15F of this Order.

(e) Definitions

    (1) ``Covered Entity'' means an entity that:
    (i) Is a security-based swap dealer registered with the Commission;
    (ii) Is not a ``U.S. person,'' as that term is defined in rule 
3a71-3(a)(4) under the Exchange Act;
    (iii) Is a systemically important bank authorized by FINMA to 
conduct banking activities in the Swiss Confederation; and
    (iv) Is supervised by FINMA under the intensive and continual 
supervision model as a Category 1 firm as that term is defined in BO 
Annex 3.
    (2) ``AccO'' means the Ordinance on the Maintenance and Retention 
of Accounts (Accounts Ordinance), CC 221.431, as amended from time to 
time.
    (3) ``AMLA'' means the Federal Act on Combating Money Laundering 
and Terrorist Financing (Anti-Money Laundering Act), CC 955, as amended 
from time to time.
    (4) ``AMLO-FINMA'' means the Ordinance of the Swiss Financial 
Market Supervisory Authority on the Prevention of Money Laundering and 
the Financing of Terrorist Activities (FINMA Anti-Money Laundering 
Ordinance), CC 955.033.0, as amended from time to time.
    (5) ``BA'' means the Federal Act on Banks and Savings Banks 
(Banking Act), CC 952, as amended from time to time.
    (6) ``BO'' means the Ordinance on Banks and Savings Banks (Banking 
Ordinance), CC 952.02, as amended from time to time.
    (7) ``CAO'' means the Ordinance concerning Capital Adequacy and 
Risk Diversification for Banks and Securities Dealers (Capital Adequacy 
Ordinance), CC 952.03, as amended from time to time.
    (8) ``CO'' means the Federal Act on the Amendment of the Swiss 
Civil Code (Part Five: The Code of Obligations), CC 220, as amended 
from time to time.
    (9) ``FinIA'' means Federal Act on Financial Institutions 
(Financial Institutions Act), CC 954.1, as amended from time to time.
    (10) ``FINMA'' means the Swiss Financial Market Supervisory 
Authority.
    (11) ``FINMA Circular 2008/4'' means the FINMA Circular 2008/4, 
Securities Journals.
    (12) ``FINMA Circular 2008/21'' means the FINMA Circular 2008/21, 
Operational Risk--Banks.
    (13) ``FINMA Circular 2010/1'' means the FINMA Circular 2010/1, 
Remuneration schemes.
    (14) ``FINMA Circular 2013/8'' means the FINMA Circular 2013/8, 
Market conduct rules, Supervisory rules on market conduct in securities 
trading.
    (15) ``FINMA Circular 2016/1'' means the FINMA Circular 2016/1, 
Disclosure--Banks.
    (16) ``FINMA Circular 2017/1'' means the FINMA Circular 2017/1, 
Corporate Governance--Banks.
    (17) ``FINMA Circular 2018/3'' means the FINMA Circular 2018/3, 
Outsourcing--Banks and Insurers.
    (18) ``FINMA Circular 2020/1'' means the FINMA Circular 2020/1, 
Accounting--Banks.
    (19) ``FINMASA'' means the Federal Act on the Swiss Financial 
Market Supervisory Authority (Financial Market Supervision Act), CC 
956.1, as amended from time to time.
    (20) ``FinMIA'' means the Federal Act on Financial Market 
Infrastructures and Market Conduct in Securities and Derivatives 
Trading (Financial Market Infrastructure Act), CC 958.1, as amended 
from time to time.
    (21) ``FMIO'' means the Ordinance on Financial Market 
Infrastructures and Market Conduct in Securities and Derivatives 
Trading (Financial Market Infrastructure Ordinance), CC 958.11, as 
amended from time to time.
    (22) ``FMIO-FINMA'' means the Ordinance of the Swiss Financial 
Market Supervisory Authority on Financial Market Infrastructures and 
Market Conduct in Securities and Derivatives Trading (FINMA Financial 
Market Infrastructure Ordinance), CC 958.111, as amended from time to 
time.
    (23) ``FinSA'' means the Federal Act on Financial Services 
(Financial Services Act), CC 950.1, as amended from time to time.
    (24) ``Liquidity Ordinance'' means the Ordinance on the Liquidity 
of Banks.

    By the Commission.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-22475 Filed 10-14-21; 8:45 am]
BILLING CODE 8011-01-P