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Federal Register / Vol. 86, No. 145 / Monday, August 2, 2021 / Notices
would be conditioned on the Covered Entities complying with applicable French and EU 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.
This condition was intended to reflect that, even with substituted compliance, Covered Entities still directly would be subject to a number of requirements under the Exchange Act and conditions of the Order that fall outside the ambit of French and EU internal supervision and compliance requirements.338
For similar reasons, the proposed Order conditioned substituted compliance in connection with compliance report requirements on the Covered Entity annually providing the Commission with certain compliance reports required pursuant to regulations under MiFID Org Reg 222C. Those reports must be in English, be accompanied by a certification under penalty of law that the report is accurate and complete, and would have to address the SBS Entitys compliance with other conditions to the substituted compliance order.339 In addition, substituted compliance under the proposal would not extend to antitrust provisions under the Exchange Act, based on the preliminary conclusion that allowing an alternative means of compliance would not lead to comparable regulatory outcomes.340

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B. Commenter Views and Final Provisions Following the release of the proposed Order, commenters requested that the conditions to substituted compliance in connection with the internal supervision and compliance requirements be narrowed by eliminating references to recordkeeping requirements pursuant to MiFID, and CRD provisions related to the treatment of risk. In the commenters view, compliance with those provisions are not necessary to justify substituted compliance.341
Partially in response to the initial comments to the proposed Order, the Reopening Release requested comment on a revision to the Order to include two additional prerequisites in 338 See id. at 8572785728. The condition was designed to allow Covered Entities 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.
339 See id. at 85728.
340 See id.
341 See SIFMA Letter at 67.

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connection with internal supervision:
CRR articles 286 through 288 and 293, which address counterparty credit risk and risk management generally; and EMIR Margin RTS article 2, which addresses collateral-related risk management procedures.342 The proposed additions were intended to promote analogous compliance goals as the other requirements identified within paragraph d3 of the proposed Order.343 The only commenter to address the proposed additions did not support them.344
Commenters requested additional alterations to the internal supervision conditions aside from those identified in the Reopening Release. Specifically, commenters recommended changes to the compliance report certification language described in paragraph d2iiB of the proposed Order, that under penalty of law, the report is accurate and complete, to language consistent with the requirement of the linked Exchange Act rule, Exchange Act rule 15Fk1c2iiD. 345
Additionally, one commenter requested that the condition requiring Covered Entities to provide certain reports pursuant to MiFID Org Reg Article 222c should apply solely to the extent the reports are related to a Covered Entitys business as an SBS
Entity. 346 Commenters also requested that the timing of compliance report submissions for reports required under MiFID Org Reg Article 222c be 15
days after the Covered Entity completes its annual MiFID report as required by MiFID 347 and alternatively 15 days after the reports submission to the AMF in April each year. 348
The Commission has considered commenters views, and is making changes to the final Order related to compliance report certification, the timing of submission of compliance reports to the Commission, and certain French and EU predicates to substituted compliance. In large part, however, the Reopening Release, 86 FR at 18384.
id.
344 See SIFMA Letter II at 1819 stating that given that paragraph d of the French Order does not extend to the risk management requirements of Exchange Act Section 15Fj2 or related requirements of Exchange Act rule 15Fh3h, which the French Order instead addresses separately in paragraph b1, we fail to see the justification for adding these requirements to paragraph d3.
345 Id. at 19. See also, FBF Letter II at 3 stating that the attestation language a bank would need to use when furnishing home country reports is stricter than that required under the SEC rule itself.
346 SIFMA Letter II at 19.
347 Id. at 1920.
348 FBF Letter II at 3.

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342 See 343 See
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Commission is adopting this part of the Order as it was proposed.
1. French and EU Predicate Conditions to Internal Supervision and Compliance Requirements In the French Substituted Compliance Notice and Proposed Order, the Commission preliminarily proposed to make a positive substituted compliance determination for supervisory and compliance requirements conditioned on Covered Entities complying with specified French and EU requirements that promote internal supervision within those entities.349 A commenter requested that the Commission not require a Covered Entity to be subject to and comply with certain of these specified requirements because the commenter argued the provisions were related to risk management and therefore should be deleted or addressed elsewhere or alternatively the provisions do not correspond to, and go beyond, the requirements of the Exchange Act.350 The Commission details below its consideration of these comments.
One commenter objected to the proposed inclusion of the risk control requirements of CRD articles 79 through 87, and French implementing provisions, Internal Control Order articles 111, 121 and 130 through 134, within the prerequisites to substituted compliance for internal supervision and control, on the grounds that the inclusion of those provisions are not necessary to justify substituted compliance.351 The commenter also recommended deleting the reference to MiFID Org Reg article 23 related to risk management and which the commenter believed was more appropriately addressed with the risk control requirements found in paragraph b of the proposed Order.352 Following the comment period reopening, that commenter further objected to the Commissions suggested inclusion of CRR articles 28688 and 293
addressing counterparty credit risk and risk management generally and EMIR
Margin RTS article 2 addressing 349 See French Substituted Compliance Notice and Proposed Order, 85 FR at 85740.
350 See SIFMA Letter II at Appendix A.
Specifically, SIFMA recommends the deletion of the following conditions from paragraph d3 of the proposed Order: i MiFID articles 166 through 10; ii MiFID Org Reg articles 23, 27, 30 through 32, 72 through 76 and Annex IV; iii CRD articles 79 through 87 and 92 through 95; iv MFC articles L. 51171 through 86, L. 51189 through 97 and L.
511102; v French Internal Control Order articles 111, 121 and 130 through 134; vi MFC article R.
511163; and vii Prudential Supervision and Risk Assessment Order article 7.
351 SIFMA Letter I at 67.
352 See id. at Appendix A.

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