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Federal Register / Vol. 86, No. 145 / Monday, August 2, 2021 / Notices
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Commission linked a requirement in Exchange Act rule 18a5 to Exchange Act rule 10b10. A commenter pointed out that Covered Entities will not be subject to Exchange Act rule 10b10.452
The Commission agrees with the commenter that there are no provisions in the Exchange Act Recordkeeping and Reporting Requirements that are linked to Exchange Act rule 10b10.
Consequently, the Order does not contain this exclusion.
Aside from this modification, the Order does not extend substituted compliance to discrete Exchange Act Recordkeeping and Reporting Requirements that are linked to substantive Exchange Act requirements for which there is no substituted compliance. In particular, a positive substituted compliance determination is not being 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 positive substituted compliance determination is not being made: 1
Exchange Act rule 15Fh4; 2 Exchange Act rule 15Fh5; 3 Exchange Act rule 15Fh6; 4 Exchange Act rule 18a2; 5
Exchange Act rule 18a4; Exchange Act rule 18a7i; and 6 Regulation SBSR.
In addition, Exchange Act rule 18a 6c in part requires firms to preserve Forms SBSE, SBSEA, SBSEC, SBSE
W, all amendments to these forms, and all other licenses or other documentation showing the firms registration with any securities regulatory authority or the U.S.
Commodity Futures Trading Commission. Because these requirements are linked to the Commissions and other U.S. regulators registration rules, for which substituted compliance is not available, the Order excludes the requirement to preserve these records from the Commissions positive substituted compliance determination with respect to Exchange Act rule 18a6c.453
Second, the Commission did not make a positive substituted compliance determination with respect to the inspection requirement of Exchange Act section 15Ff and the records production the requirement of Exchange Act rule 18a6g.454 The Commission directed commenters to the UK Substituted Compliance Notice and Proposed Order to indicate how this approach would be implemented in ordering language. See also UK Substituted Compliance Notice and Proposed Order, 86 FR at 18395, 1841520.
452 See SIFMA Letter II at 18.
453 See para. f2iL of the Order.
454 See French Substituted Compliance Notice and Proposed Order, 85 FR at 85734 discussing this condition.

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did not receive comment on this approach and the Order does not extend substituted compliance to these requirements.
Third, the Commission solicited comment on conditioning substituted compliance with discrete provisions of the Exchange Act Recordkeeping and Reporting 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.455 In particular, substituted compliance for a provision of the Exchange Act Recordkeeping and Reporting Requirements that is linked to the following Exchange Act rules is conditioned on the SBS Entity applying substituted compliance to the linked substantive Exchange Act rule: 1
Exchange Act rule 15Fh3; 2 Exchange Act rule 15Fi2; 3 Exchange Act rule 15Fi3; 4 Exchange Act rule 15Fi4;
5 Exchange Act rule 15Fi5; 6
Exchange Act rule 15Fk1; 7 Exchange Act rule 18a1 Rule 18a1
Condition; 8 Exchange Act rule 18a 3; 8 Exchange Act rule 18a5; and 9
Exchange Act rule 18a7. The Commission did not receive comment on this approach and is adopting it in the Order. The only difference is that the positive substituted compliance determination for Exchange Act rule 18a 6b1viii is now conditioned on the Covered Entity applying substituted compliance for the requirements of Exchange Act rule 18a7a1, b, c through h, and Exchange Act rule 18a 7j as applied to these requirements, rather than on the entirety of Exchange Act rule 18a7, to reflect that substituted compliance with respect to Exchange Act rule 18a7 is granted on a paragraph-by-paragraph basis and not all paragraphs of Exchange Act rule 18a7 are pertinent to Exchange Act rule 18a6b1viii.
Moreover, for the reasons discussed above in part III.B.2.e. of this release, substituted compliance with respect to paragraphs a1, b, and c through h of Exchange Act rule 18a7 is subject to the additional condition that the Covered Entity applies substituted compliance with respect to Exchange Act rule 18a6b1viii a record 455 See Reopening Release, 86 FR at 18348
discussing this condition. The Commission directed commenters to the UK Substituted Compliance Notice and Proposed Order to indicate how this approach would be implemented in ordering language. See also UK Substituted Compliance Notice and Proposed Order, 86 FR
18395, 1841520.

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preservation requirement.456 This record preservation requirement is directly linked to the financial and operational reporting requirements of paragraphs a1, b, and c through h of Exchange Act rule 18a7. The UK
Proposed Order conditioned substituted compliance with respect to this record preservation requirement on the Covered Entity applying substituted compliance with respect to Exchange Act rule 18a7a1.457 This additional condition is designed to provide clarity as to the Covered Entitys obligations under this record preservation requirement when applying substituted compliance with respect to paragraphs a1, b, and c through h of Exchange Act rule 18a7 pursuant this Order.
Fourth, the Commission conditioned substituted compliance with discrete provisions of the Exchange Act Recordkeeping and Reporting Requirements that would be important for monitoring or examining compliance with the capital rule for nonbank security-based swap dealers on the Covered Entity applying substituted compliance with respect to the capital rule i.e., the Rule 18a1 Condition.458
The Commission did not receive comment on this aspect of the Reopening Release and the Order includes the Rule 18a1 condition for discrete provisions of the Exchange Act Recordkeeping and Reporting Requirements that would be important for monitoring or examining compliance with the capital rule for nonbank security-based swap dealers, as proposed.459
456 See
para. f3iD of the Order.
UK Substituted Compliance Notice and Proposed Order, 86 FR at 18399, 18417. The Commission sought comment in the Reopening Release on whether this approach should be taken in the final Order. See Reopening Release, 86 FR at 18348.
458 See Reopening Release, 86 FR at 18348
discussing this condition. The Commission directed commenters to the UK Substituted Compliance Notice and Proposed Order to indicate how this approach would be implemented in ordering language. See also UK Substituted Compliance Notice and Proposed Order, 86 FR
18395, 1841520.
459 The Commission included the Rule 18a1
condition in the UK Substituted Compliance Notice and Proposed Order as part of the substituted compliance determination for the daily trading records requirement of Exchange Act section 15Fg.
UK Substituted Compliance Notice and Proposed Order, 86 FR at 18420. A commenter asked that the condition be modified so that it applies only if the Covered Entity is not prudentially regulated and therefore subject to Rule 18a1. SIFMA UK Letter at 23. Instead, the Commission has determined to delete this condition from the substituted compliance determination with respect to Exchange Act section 15Fg generally because the requirements of Exchange Act section 15 Fg are not important for monitoring or examining for 457 See
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