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khammond on DSKJM1Z7X2PROD with RULES3

Federal Register / Vol. 86, No. 27 / Thursday, February 11, 2021 / Rules and Regulations 4 Taking reasonable steps to ensure compliance with the Act and the rules of the Commission;
5 Establishing procedures reasonably designed to handle, respond, remediate, retest, and resolve noncompliance issues identified by the chief compliance officer through any means, including any compliance office review, look-back, internal or external audit finding, self-reported error, or validated complaint;
6 Establishing and administering a compliance manual designed to promote compliance with the applicable laws, rules, and regulations and a written code of ethics for the swap execution facility designed to prevent ethical violations and to promote honesty and ethical conduct by personnel of the swap execution facility;
7 Supervising the self-regulatory program of the swap execution facility with respect to trade practice surveillance; market surveillance; real time market monitoring; compliance with audit trail requirements;
enforcement and disciplinary proceedings; audits, examinations, and other regulatory responsibilities including taking reasonable steps to ensure compliance with, if applicable, financial integrity, financial reporting, sales practice, recordkeeping, and other requirements; and 8 Supervising the effectiveness and sufficiency of any regulatory services provided to the swap execution facility by a regulatory service provider in accordance with 37.204.
d Preparation of annual compliance report. The chief compliance officer shall, not less than annually, prepare and sign an annual compliance report that covers the prior fiscal year. The report shall, at a minimum, contain:
1 A description and self-assessment of the effectiveness of the written policies and procedures of the swap execution facility, including the code of ethics and conflict of interest policies, to reasonably ensure compliance with the Act and applicable Commission regulations;
2 Any material changes made to compliance policies and procedures during the coverage period for the report and any areas of improvement or recommended changes to the compliance program;
3 A description of the financial, managerial, and operational resources set aside for compliance with the Act and applicable Commission regulations;
4 Any material non-compliance matters identified and an explanation of the corresponding action taken to resolve such non-compliance matters;
and
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5 A certification by the chief compliance officer that, to the best of his or her knowledge and reasonable belief, and under penalty of law, the annual compliance report is accurate and complete in all material respects.
e Submission of annual compliance report and related matters1
Furnishing the annual compliance report prior to submission to the Commission. Prior to submission to the Commission, the chief compliance officer shall provide the annual compliance report for review to the board of directors of the swap execution facility or, in the absence of a board of directors, to the senior officer of the swap execution facility. Members of the board of directors and the senior officer shall not require the chief compliance officer to make any changes to the report.
2 Submission of annual compliance report to the Commission. The annual compliance report shall be submitted electronically to the Commission not later than 90 calendar days after the end of the swap execution facilitys fiscal year. The swap execution facility shall concurrently file the annual compliance report with the fourth-quarter financial report pursuant to 37.1306.
3 Amendments to annual compliance report. i Promptly upon discovery of any material error or omission made in a previously filed annual compliance report, the chief compliance officer shall file an amendment with the Commission to correct the material error or omission.
The chief compliance officer shall submit the amended annual compliance report to the board of directors, or in the absence of a board of directors, to the senior officer of the swap execution facility, pursuant to paragraph e1 of this section.
ii An amendment shall contain the certification required under paragraph d5 of this section.
4 Request for extension. A swap execution facility may request an extension of time to file its annual compliance report from the Commission. Reasonable and valid requests for extensions of the filing deadline may be granted at the discretion of the Commission.
f Recordkeeping. The swap execution facility shall maintain all records demonstrating compliance with the duties of the chief compliance officer and the preparation and submission of annual compliance reports consistent with 37.1000 and 37.1001.
g Delegation of authority. The Commission hereby delegates, until it orders otherwise, to the Director of the
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Division of Market Oversight or such other employee or employees as the Director may designate from time to time, the authority to grant or deny a request for an extension of time for a swap execution facility to file its annual compliance report under paragraph e4 of this section. The Director may submit to the Commission for its consideration any matter that has been delegated in this paragraph. Nothing in this paragraph prohibits the Commission, at its election, from exercising the authority delegated in this paragraph.
5. Amend Appendix B to Part 37 by:
a. Under the heading Core Principle 13 of Section 5h of the ActFinancial Resources, adding paragraph b; and b. Under the heading Core Principle 15 of Section 5h of the ActDesignation of Chief Compliance Officer, adding paragraph b.
The additions read as follows:
Appendix B to Part 37Guidance on, and Acceptable Practices in, Compliance With Core Principles

Core Principle 13 of Section 5h of the Act Financial Resources

b Acceptable Practices1 Reasonable calculation of projected operating costs. In connection with a swap execution facility calculating its projected operating costs, the Commission has determined that a reasonable calculation should include all expenses necessary for the swap execution facility to comply with the core principles set forth in section 5h of the Act and any applicable Commission regulations. This calculation should be based on the swap execution facilitys current level of business and business model, and should take into account any projected modification to its business model e.g., the addition or subtraction of business lines or operations or other changes, and any projected increase or decrease in its level of business over the next 12 months. The Commission believes, however, that it may be reasonable for a swap execution facility to exclude the following expenses excludable expenses from its projected operating cost calculations:
i Costs attributable solely to sales, marketing, business development, product development, or recruitment and any related travel, entertainment, event, or conference costs;
ii Compensation and related taxes and benefits for swap execution facility personnel who are not necessary to ensure that the swap execution facility is able to comply with the core principles set forth in section 5h of the Act and any applicable Commission regulations;
iii Costs for acquiring and defending patents and trademarks for swap execution facility products and related intellectual property;
iv Magazine, newspaper, and online periodical subscription fees;

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