Je veux savoir à propos de…

43348

Federal Register / Vol. 86, No. 149 / Friday, August 6, 2021 / Notices
jbell on DSKJLSW7X2PROD with NOTICES2

requirements related to informationgathering and antitrust prohibitions.324
Taken as a whole, those requirements generally help to advance SBS Entities use of structures, processes, and responsible personnel reasonably designed to promote compliance with applicable law, identify and cure instances of noncompliance, and manage conflicts of interest.
In proposing to provide conditional substituted compliance in connection with this part of the FCA Application, the Commission preliminarily concluded that the relevant UK
requirements in general would produce comparable regulatory outcomes by providing that UK SBS Entities have structures and processes that reasonably are designed to promote compliance with applicable law, to identify and cure instances of non-compliance, and to manage conflicts of interest.
Substituted compliance under the proposed Order was to be conditioned in part on SBS Entities being subject to and complying with specified UK
provisions that in the aggregate help to produce regulatory outcomes that are comparable to those associated with those internal supervision, chief compliance officer and related requirements under the Exchange Act.325
Under the proposed Order, substituted compliance would be subject to certain additional conditions to help ensure the comparability of outcomes. First, substituted compliance in connection with Exchange Act internal supervision requirements including related information gathering requirements under Exchange Act 324 See UK Substituted Compliance Notice and Proposed Order, 86 FR at 18389. Section 15Fj4A requires firms to have systems and procedures to obtain necessary information to perform functions required under section 15F.
Section 15Fj6 prohibits firms from adopting any process or taking any action that results in any unreasonable restraint of trade, or to impose any material anticompetitive burden on trading or clearing.
325 See UK Substituted Compliance Notice and Proposed Order, 86 FR at 18389 n.109. Each of the comparable UK internal supervision and chief compliance officer requirements listed in the proposed Order applies to a uniquely defined set of UK-authorized firms. See UK Substituted Compliance Notice and Proposed Order, 86 FR at 18390 and n.112. To assist UK firms in determining whether they are subject to these requirements, the Commission preliminarily determined that any Covered Entity that is an IFPRU investment firm, UK bank or UK designated investment firm, each as defined for purposes of UK law, would be subject to all of the required UK requirements related to internal supervision and chief compliance officer requirements and thus eligible to apply substituted compliance for internal supervision and chief compliance officer requirements. See UK Substituted Compliance Notice and Proposed Order, 86 FR at 18390.

VerDate Sep<11>2014

20:04 Aug 05, 2021

Jkt 253001

section 15Fj4A and related conflict of interest systems and procedures requirements under Exchange Act section 15Fj5 would be conditioned on the Covered Entity complying with applicable UK supervisory and compliance provisions as if those provisions also require the Covered Entity to comply with applicable requirements under the Exchange Act and the other applicable conditions of the Order. This condition reflects that, even with substituted compliance, Covered Entities still directly would be subject to a number of requirements under the Exchange Act and conditions to the final Order.326 Under the proposed Order, substituted compliance for Exchange Act internal supervision requirements would not extend to internal supervision in connection with the internal risk management requirements, certain information reporting requirements or anti-trust requirements.327
For similar reasons, the proposed Order conditioned substituted compliance in connection with compliance report requirements on the Covered Entity at least annually providing the Commission with all compliance reports required pursuant to UK MiFID Org Reg article 222c.
Those reports would be required to be in English and 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 applicable conditions to the substituted compliance order.328
The Commission preliminarily did not provide substituted compliance for Exchange Act antitrust provisions, based on the preliminary conclusion that allowing an alternative means of 326 See UK Substituted Compliance Notice and Proposed Order, 86 FR at 18390. These residual Exchange Act requirements could, for example, relate to requirements for which substituted compliance is not available, requirements for which the Order does not make a positive substituted compliance determination, security-based swap business for which the Covered Entity is unable to satisfy the conditions of the Order, and/or requirements or security-based swap business for which the Covered Entity decides not to use substituted compliance. The condition was designed to allow a Covered Entity 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.
327 See UK Substituted Compliance Notice and Proposed Order, 86 FR at 18389 and n.108.
328 See UK Substituted Compliance Notice and Proposed Order, 86 FR at 18390. The condition was designed to allow a Covered Entity to leverage the compliance reports that it must produce pursuant to UK requirements, by extending those reports to address compliance with the conditions to the proposed Order.

PO 00000

Frm 00032

Fmt 4701

Sfmt 4703

compliance would not lead to comparable regulatory outcomes.329
B. Commenter Views and Final Provisions After considering commenters recommendations regarding internal supervision, chief compliance officer and related requirements, the Commission is making positive substituted compliance determinations in connection with internal supervision including related information gathering requirements under Exchange Act section 15Fj4A and related conflict of interest systems and procedures requirements under Exchange Act section 15Fj5 and chief compliance officer requirements.
One commenter expressed general support for the proposed approach toward substituted compliance for the risk control provisions.330 Another commenter stated that UK requirements are not sufficiently comparable to Exchange Act requirements.331 As discussed below, the final Order has been changed from the proposed Order in certain respects in response to comments.332 The Commission continues to conclude that, taken as a whole, applicable requirements under UK law require that SBS Entities have structures and processes that reasonably are designed to promote compliance with applicable law, to identify and cure instances of non-compliance, and to manage conflicts of interest, and thus produce regulatory outcomes that are comparable to those associated with the above-described internal supervision and chief compliance officer requirements. Although there are differences between the approaches taken by the relevant internal supervision and chief compliance officer requirements under the Exchange Act and relevant UK requirements, the Commission continues to believe that 329 See UK Substituted Compliance Notice and Proposed Order, 86 FR at 18390.
330 See SIFMA 5/3/2021 Letter at 2021. The commenter also requested that the Commission not require a Covered Entity to be subject to and comply with some of the UK internal supervision and chief compliance officer requirements listed in the proposed Order. In addition, the commenter requested that the Commission amend the conditions to substituted compliance for chief compliance officer requirements. See SIFMA 5/3/
2021 Letter at 2021 and Appendix A part d. The Commission addresses those requests in the relevant sections of this part VI below.
331 See Better Markets Letter at 2. The commenter also stated that, if the Commission nevertheless makes a positive substituted compliance determination, it must at a minimum ensure that the conditions in the proposed Order are applied with full force and without exceptions or dilution.
The Commission addresses that comment in the relevant sections of this part VI below.
332 See para. d of the Order.

E:FRFM06AUN2.SGM

06AUN2