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Federal Register / Vol. 86, No. 155 / Monday, August 16, 2021 / Notices rules/proposed.shtml. Typically, comments are also available for viewing and printing in the Commissions Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Due to pandemic conditions, however, access to the Commissions Public Reference Room is not permitted at this time. All comments received will be posted without change. Persons submitting comments are cautioned that the Commission does not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make publicly available.
FOR FURTHER INFORMATION CONTACT:
Carol M. McGee, Assistant Director or James R. Curley, Special Counsel, at 2025515870, Office of Derivatives Policy, Division of Trading and Markets, Securities and Exchange Commission, 100 F Street NE, Washington, DC
205497010.
SUPPLEMENTARY INFORMATION: The Commission is soliciting public comment on an application by the Swiss Firms requesting that the Commission determine that SBSDs that are not U.S.
persons and that are subject to certain regulation in Switzerland may satisfy certain requirements under the Exchange Act by complying with comparable requirements in Switzerland. The Commission also is soliciting comment on a proposed Order, set forth in Attachment A, providing for conditional substituted compliance in connection with the application.
I. Background
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On August 6, 2021, market participants will begin to count security-based swap transactions toward the thresholds for registration with the Commission as SBSDs.1 Exchange Act rule 3a716 2 conditionally provides that non-U.S. SBSDs and major securitybased swap participants SBS
Entities may satisfy certain requirements under Exchange Act section 15F 3 by complying with comparable regulatory requirements of a foreign jurisdiction.4 Substituted 1 See Exchange Act Release No. 86175 June 21, 2019, 84 FR 43872, 43954 Aug. 22, 2019 Capital and Margin Adopting Release; see also Exchange Act Release No. 87780 Dec. 18, 2019, 85 FR 6270, 634549 Feb. 4, 2020.
2 17 CFR 240.3a716.
3 15 U.S.C. 78o10.
4 The Commission also has discussed the parameters of substituted compliance in connection with substituted compliance requests regarding the Federal Republic of Germany Germany, the French Republic France, and the United
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compliance potentially is available in connection with requirements regarding business conduct and supervision, chief compliance officers, trade acknowledgment and verification, nonprudentially regulated capital and margin, recordkeeping and reporting, portfolio reconciliation and dispute reporting, portfolio compression and trading relationship documentation.5
Substituted compliance in part is predicated on the Commission determining the analogous foreign requirements are comparable to the applicable requirements under the Exchange Act, after accounting for factors such as the scope and objectives of the relevant foreign regulatory requirements and the effectiveness of the relevant foreign authoritys or authorities supervisory and enforcement frameworks.6
Substituted compliance further requires that the Commission and the relevant foreign financial regulatory authorities have entered into an effective supervisory and enforcement Kingdom UK. See Exchange Act Release No.
90378 Nov. 9, 2020, 85 FR 72726 Nov. 13, 2020
German Notice and Proposed Order; Exchange Act Release No. 90765 Dec. 22, 2020, 85 FR 85686
Dec. 29, 2020 German Substituted Compliance Order; Exchange Act Release No. 90766 Dec. 22, 2020, 85 FR 85720 Dec. 29, 2020 French Notice and Proposed Order; Exchange Act Release No.
91477 Apr. 5, 2021, 86 FR 18341 Apr. 8, 2021
French Reopening Release; Exchange Act Release No. 92484 July 23, 2021, 86 FR 41612
Aug. 2, 2021 French Substituted Compliance Order; Exchange Act Release No. 91476 Apr. 5, 2021, 65 FR 18378 Apr. 8, 2021 UK Notice and Proposed Order; Exchange Act Release No. 92529
July 30, 2021, 86 FR 43318 Aug. 6, 2021 UK
Substituted Compliance Order.
5 See Exchange Act rule 3a716d. Substituted compliance is not available for antifraud prohibitions and information-related requirements under section 15F. See Exchange Act rule 3a71
6d1 specifying that substituted compliance is not available in connection with the antifraud provisions of Exchange Act section 15Fh4A
and Exchange Act rule 15Fh4a, 17 CFR
240.15Fh4a, and the information-related provisions of Exchange Act sections 15Fj3 and 15Fj4B. Substituted compliance under rule 3a716 also does not extend to certain other provisions of the federal securities laws that apply to security-based swaps, such as: 1 Additional antifraud prohibitions see Exchange Act section 10b, 15 U.S.C. 78jb, Exchange Act rule 10b5, 17
CFR 240.10b5, and Securities Act of 1933 section 17a, 15 U.S.C. 77qa; 2 requirements related to transactions with counterparties that are not eligible contract participants ECPs see Exchange Act section 6l, 15 U.S.C. 78fl; Securities Act of 1933
section 5e, 15 U.S.C. 77ee; 3 segregation of customer assets see Exchange Act section 3E, 15
U.S.C. 78c5; Exchange Act rule 18a4, 17 CFR
240.18a4; 4 required clearing upon counterparty election see Exchange Act section 3Cg5, 15
U.S.C. 78c3g5; 5 regulatory reporting and public dissemination see generally Regulation SBSR, 17 CFR 242.900 et seq.; 6 SBS Entity registration see Exchange Act section 15Fa and b; and 7 registration of offerings see Securities Act of 1933 section 5, 15 U.S.C. 77e.
6 See Exchange Act rule 3a716a2i.

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memorandum of understanding and/or other arrangement addressing cooperation and other matters related to substituted compliance.7
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. 8 Commission rule 013 9
addresses procedures for filing substituted compliance applications.
The rule provides that the Commission will publish a notice when a completed application has been submitted and that any person may submit to the Commission any information that relates to the Commission action requested in the application. 10
II. The Swiss Firms Substituted Compliance Request The Swiss Firms have submitted a complete substituted compliance application to the Commission Swiss Application.11 Pursuant to rule 013, the Commission is publishing notice of the Swiss Application together with a proposed Order to conditionally grant substituted compliance to an entity that 1 is a security-based swap dealer registered with the Commission; 2 is not a U.S. person, as that term is defined in rule 3a713a4 under the 7 See Exchange Act rule 3a716a2ii. The Commission and FINMA are in the process of negotiating a memorandum of understanding to address cooperation matters related to substituted compliance. The memorandum of understanding or other arrangement will need to be in place before the Commission may make a final determination allowing Covered Entities as defined herein to use substituted compliance to satisfy obligations under the Exchange Act. The Commission expects to publish any such memorandum of understanding or arrangement on its 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.
8 See 17 CFR 240.15Fb24c1; Exchange Act rule 3a716c1ii. In the Commission;s view the Swiss Firms have satisfied this prerequisite. 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 Swiss Application. The Swiss Firms Application is available on the Commissions website at: https
www.sec.gov/page/exchange-act-substitutedcompliance-and-listed-jurisdiction-applicationssecurity-based-swap.
9 17 CFR 240.013.
10 See Commission rule 013h. The Commission may take final action on a substituted compliance application no earlier than 25 days following publication of the notice in the Federal Register.
See id.
11 See Swiss Application sections IIV.

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