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Federal Register / Vol. 86, No. 149 / Friday, August 6, 2021 / Notices governance, reasoning that it does not correspond to, and goes beyond, the requirements of Exchange Act rules 18a6d4 and d5. However, the FCA Application cites this provision as requiring the maintenance of a range of risk management records,480 which is relevant to Exchange Act rules 18a 6d4 and d5. Accordingly, the Commission is not removing references to these UK requirements from the Orders list of UK requirements comparable to Exchange Act rules 18a 6d4 and d5.
The commenter recommended deleting from paragraph f2iQ of the Order references to FCA SYSC
4.1.1R1, which is a general requirement concerning a firms governance, reasoning that it does not correspond to, and goes beyond, the requirements of Exchange Act rule 18a 6e. However, the FCA Application cites this provision as requiring sound security mechanisms in place to guarantee the security and authentication of the means of transfer of information, minimize the risk of data corruption and unauthorized access and to prevent information leakage maintaining the confidentiality of the data at all times,481 which is relevant to Exchange Act rule 18a6e.
Accordingly, the Commission is not removing references to these UK
requirements from the Orders list of UK
requirements comparable to Exchange Act rule 18a6e.

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c. Exchange Act Rule 18a7
The commenter recommended deleting references to FSMA sections 137A, 137G, and 137T from paragraph f3iA reasoning that these provisions relate to the FCAs and PRAs powers to make rules and do not impose requirements on firms. Additionally, the commenter recommended deleting reference to CRD article 1041j reasoning that this provision does not form part of UK law. The Commission agrees with the commenters reasoning and is removing references to these UK
requirements from the list of UK
requirements comparable to Exchange Act rules 18a7a1 and a2.482
The commenter recommended deleting references to UK CRR rules that are set out in Part 8 of UK CRR relating to public disclosure in paragraph f3iiA, reasoning that they do not correspond to, and go beyond, the requirements of Exchange Act rule 18a
7a3 and Exchange Act rule 18a7j.
However, the FCA application cites CRR
articles 431, 433, 452, 454, and 455 as requiring, among other things, firms to make Pillar III disclosures which include information on the use of capital models and matters such as credit risk, the exposure values by class of exposures subject to evaluation using models, and internal controls on the development and use of models.483 This information is relevant to rule 18a 7a3 and 18a7j. Accordingly, the Commission is removing references to UK CRR rules that are set out in Part 8
of UK CRR except for UK CRR articles 431, 433, 452, 454, and 455 in the Orders list of UK requirements comparable to Exchange Act rule 18a 7a3 and 18a7j.484
The commenter recommended deleting references to FSMA sections 137A, 137G, and 137T in paragraph f3iiA. As discussed above, the commenter has stated that these sections relate to the FCAs and the PRAs powers to make rules, and do not impose requirements on firms. The Commission agrees with this reasoning and is therefore removing references to these to these UK requirements from the Orders list of requirements comparable to Exchange Act rules 18a7a3 and 18a7j.485
The commenter recommended deleting from paragraph f3ivA
references to the following FCA CASS
sections: 6.2.2R, 6.6.2R, 6.6.3.R, 6.6.33G, 6.6.34R, 7.12.2R, 7.15.2R, 7.15.3R, 7.15.20R, and 7.15.21R. Additionally, the commenter recommended deleting references to FCA SUP sections 3.10.4R
through 3.10.7R and the following UK
CRR articles: 262, 1325, 154, 191, 321, 325bi, 350, 353, 368, and 418. The commenter reasoned that these provisions do not correspond to, and go beyond, the requirements of Exchange Act rules 18a7c, d, e, f, g, and h, and Exchange Act rule 18a7j.
However, the FCA Application states that, pursuant to FCA CASS 6.2.2R, 6.62R, 6.63R, 6.6.33G, 6.6.34R 7.12.2R, 7.15.2R, 7.15.3R, 7.15.20R, and 7.15.21R, investment firms must ensure the segregation of client money and assets from those of the firm, maintain detailed records distinguishing client money and assets from those of the firm, and must conduct regular reconciliations between their accounts and records and those accounts and 483 See
FCA Application at 17879.
para. f3iiA of the UK
Substituted Compliance Notice and Proposed Order, with para. f3iiA of the Order.
485 Compare para. f3iiA of the UK
Substituted Compliance Notice and Proposed Order, with para. f3iiA of the Order.
484 Compare
480 See
FCA Application at 16061.
FCA Application at 165.
482 Compare para. f3iA of the UK
Substituted Compliance Notice and Proposed Order, with para. f3iA of the Order.
481 See
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records of any third-parties with whom client money or assets may be held.
Additionally, the FCA Application states that the that information about client money required under FCA CASS
7.12.2R, 7.15.2R, 7.15.3R, 7.15.20R, and 7.15.21R is comparable to the information required under Exchange Act rules 18a7c1iB and 17a 7c3 and 4.486 Moreover, the FCA
Application states that certain firms must have their financial statements audited pursuant to Companies Act section 475, and that under FCA SUP
3.8.5R and 3.10.4R through 3.10.7R an independent auditor must submit a client money and assets report to the FCA, within the prescribed time period and format, providing reasonable assurance that, among other things, the investment firm has maintained adequate systems to enable it to comply with the FCA CASS Rules. The FCA
Application goes on to state that CRR
article 262 relates to the inclusion of a firms interim or year-end profits in Common Equity Tier 1 capital and the associated requirement that such profits be verified by persons independent of the firm, and that CRR articles 1325
and 154 set forth requirements for a firm to engage an external auditor to confirm the accuracy of information regarding the firms calculations with respect to average risk weights for certain exposures which is comparable to the requirements under Exchange Act rules 18a7c1iC and 18a7d through g. Furthermore the FCA Application states that, for firms using internal models to calculate credit risk, operational risk, market risk exposures, or market risk capital requirement, CRR
articles 191, 321, 325bi, and 368 require various levels of internal or external audit and/or review of the models, systems, and/or operations. The FCA
application states where investment firms rely on a depository or management company of a collective investment undertaking, CRR articles 418, 350, and 353 require the investment firm to calculate and report own funds requirements for the market value of haircuts, and position risk with respect to positions in specified instruments.487 As a result, the FCA
Application states that the UK report review requirements provide for comparable regulatory outcomes to the SEC report review requirements, as both regulatory regimes require firms to submit reports by independent auditors on the firms financial and operational information in order to ensure the accuracy of information and protect 486 See 487 See
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FCA Application at 17576.
FCA Application at 177 and 18689.

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