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Federal Register / Vol. 86, No. 145 / Monday, August 2, 2021 / Notices
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collateral-related risk management procedures to the prerequisites.353 The commenter argued that those additions inappropriately would expand the substantive ambit of the linked Exchange Act requirements. 354 The Commission nonetheless concludes that those CRD, CRR, MiFID Org Reg, and EMIR Margin RTS provisions appropriately constitute part of the substituted compliance conditions for internal supervision and compliance.
Supervision and compliance requirements serve the purpose of causing registered entities to have systems and follow practices to help ensure they conduct their business as required. It would be paradoxical to conclude that an SBS Entity that fails to implement requisite internal risk management systems and practices nonetheless may be considered to be following supervision and compliance standards that are sufficient to meet the regulatory outcomes required under the Exchange Act. A risk management failure necessarily constitutes a compliance failure. Accordingly, the Commission is retaining the references to these provisions. The commenter also requested the removal of MFC R. 511
163, based on the claim that it does not exist.355 However, the Commission has not determined that to be the case.356
One commenter recommended that the Commission delete MiFID article 166 through 1610 related to recordkeeping and client asset safeguarding requirements and the corresponding French implementing provisions; 357 CRD articles 92 through 95, MFC articles L. 511.71 through L.
511.86, and MiFID Org Reg article 27
related to remuneration, MiFID Org Reg articles 30 through 32 related to outsourcing; 358 and MFC articles L.
353 See Reopening Release, 86 FR at 18348 stating that those provisions promote analogous compliance goals as the other proposed conditions to substituted compliance for internal supervision and compliance.
354 SIFMA Letter II at 1819 Simply asserting that these requirements promote analogous compliance goals is not enough; under that theory, seemingly every provision of EU or French law would be relevant to internal supervision and compliance, but this cannot be the case..
355 SIFMA Letter II at Appendix A.
356 MFC R. 511163 acts as the French implementing provision for CRD article 918, which the commenter did not object to including, and both of which were included in the proposed Order and are now included in paragraph d3 of the Order.
357 MiFID articles 166 through 1610 is implemented in France in MFC articles 1.53310.II
6 through 9 and L. 53310.III which are included as conditions to supervisory and compliance substituted compliance in paragraph d3 of the Order.
358 See SIFMA Letter II at Appendix A. Paragraph d3 of the proposed Order also included MiFID

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51189 through L. 51197 and L. 511
102 related to risk and remuneration committees. The commenter stated that those provisions do not correspond to, and go beyond, the applicable requirements of the Exchange Act.359 In addition, the commenter stated that the MiFID provisions did not relate to supervisory or compliance requirements. 360 The Commission believes that the MiFID and corresponding French implementing provisions and MiFID Org Reg conditions taken as a whole are relevant to its substituted compliance determination for internal supervision and compliance and taken together the specified French and EU provisions promote adequate supervision within the Covered Entities complying with those requirements. Accordingly, the Commission is retaining the references to these provisions with one exception.361
The comparability analysis requires consideration of Exchange Act requirements as a whole against analogous French and EU requirements as a whole, recognizing that U.S. and non-U.S. regimes may follow materially different approaches in terms of specificity and technical content. This as a whole approachwhich the Commission is following in lieu of requiring requirement-by-requirement similarityfurther means that the conditions to substituted compliance should encompass all French and EU
requirements that establish comparability with the applicable regulatory outcome. It would be inconsistent with the holistic approach to excise relevant requirements and leave only the residual French and EU
provisions that most closely resemble the analogous Exchange Act requirements.362 In reaching this conclusion, the Commission emphasizes the importance of ensuring that substituted compliance is grounded on Org Reg articles 23 and 72 through 76 and Annex IV as conditions to internal supervision substituted compliance. These MiFID Org Reg articles relate to risk management and recordkeeping, respectively, and are addressed elsewhere in this section.
359 See SIFMA Letter at II Appendix A.
360 Id.
361 The Commission is deleting the requirements related to CRD article 93 and related implementing provisions, as they were not part of the French Authorities Application, and relate to remuneration policies for institutions that benefit from exceptional French and EU government intervention.
362 The Commission believes that those conditions to substituted compliance do not expand the substantive ambit of the linked Exchange Act requirements given that substituted compliance is an option available to non-U.S. SBS
Entitiesnot a mandate.

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the comparability of regulatory outcomes.363
2. Compliance Report Certifications Commenters requested that the standard applied to the certification of required compliance reports upon their submission to the Commission be revised to conform more closely with the requirements set forth in Exchange Act rule 15Fk1.364 Rule 15Fk1 states that the required reports must include a certification by the chief compliance officer or senior officer that, to the best of his or her knowledge and reasonable belief and under penalty of law, the information contained in the compliance report is accurate and complete in all material respects. 365
The standard applied in the proposed Order required certification that under penalty of law, the report is accurate and complete. 366 The Commission concurs that alignment of the Orders certification requirement with that of the applicable Exchange Act rule is appropriate in this instance. Therefore, the Order has been updated to clarify that the required reports should be certified by the chief compliance officer or senior officer of the Covered Entity and that the same certification standard contained in Exchange Act rule 15Fk1 applies.367 In addition, the Order has been updated to clarify that the certification must cover compliance with applicable Exchange Act requirements, consistent with the requirements regarding internal supervision.368 The Commission believes that this clarification is necessary, particularly in light of its granular approach to substituted compliance, to ensure that the report covers applicable Exchange Act requirements whether or not the SBS
Entity relies on substituted compliance for internal supervision.
3. Timing of Compliance Report Submission Commenters requested that the Order be amended to clarify the timing for 363 See Better Markets Letter at 3 addressing need for a compelling showing of comparability.
364 See SIFMA Letter I at 7 n.14; SIFMA Letter II
at 19 stating that paragraph d2iiB of the French Order should be conformed to be consistent with the linked Exchange Act requirement.; see also FBF Letter 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..
365 See Exchange Act rule 15Fk1c2iiD. See also Exchange Act rule 15Fk1e2 defining senior officer as the chief executive officer or other equivalent officer.
366 French Substituted Compliance Notice and Proposed Order, 81 FR at 85740.
367 See para. d2iiB of the Order.
368 See para. d4 of the Order.

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