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Federal Register / Vol. 86, No. 155 / Monday, August 16, 2021 / Notices officer 71 of the Covered Entity that, to the best of the certifiers knowledge and reasonable belief and under penalty of law, the report is accurate and complete in all material respects; 3 address the Covered Entitys compliance with applicable requirements under the Exchange Act and other applicable conditions of the proposed Order in connection with requirements for which the Covered Entity is relying on the proposed Order; 4 be provided to the Commission no later than 15 days following the earlier of the submission of the report to the Covered Entitys management body or the time the report is required to be submitted to the management body; and 5 together cover the entire period that the Covered Entitys annual compliance report referenced in Exchange Act section 15Fk3 and Exchange Act rule 15Fk 1c would be required to cover.72
Although certain Swiss requirements address a Covered Entitys use of internal compliance reports, those provisions do not require it to submit compliance reports to the Commission.
Under this condition, a Covered Entity could leverage the compliance reports that it otherwise must produce, by extending those reports to address compliance with the conditions of the proposed Order.73

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c. Antitrust Considerations Under the proposed Order, substituted compliance would not extend to Exchange Act section 15Fj6
and related internal supervision requirements of Exchange Act rule 15Fh3h2iiiI. Allowing an alternative means of compliance would not lead to outcomes comparable to that statutory prohibition.74
71 See Exchange Act rule 15Fk1e2 defining senior officer as the chief executive officer or other equivalent officer.
72 See para. c2 of the proposed Order. FINMA
Circular 2017/1 margins 7881 require that a Covered Entitys compliance function annually report to the executive board its assessment of compliance risks and report on the activities of the compliance function. A copy of these reports shall be provided to Internal Audit as well as the audit firm. Under the proposed condition, those reports, as submitted to the Commission and the Covered Entitys management body, also would address the Covered Entitys compliance with the other conditions of the proposed Order in addition to addressing the Covered Entitys compliance with applicable Swiss provisions.
73 In practice, a Covered Entity may satisfy this condition by identifying relevant Order conditions and reporting on the implementation and effectiveness of its controls with regard to compliance with those Order conditions.
74 See also German Substituted Compliance Order, 85 FR at 8569192; French Substituted Compliance Order, 86 FR at 41643; UK Substituted Compliance Order, 86 FR at 43353. The Commission is not taking any position regarding the applicability of the section 15Fj6 antitrust
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VII. Substituted Compliance for Recordkeeping, Reporting and Notification Requirements A. Swiss Firms Request and Associated Analytic Considerations The Swiss Application in part requests substituted compliance for requirements applicable to SBS Entities with a prudential regulator under the Exchange Act relating to:
Record MakingExchange Act rule 18a5 requires prescribed records to be made and kept current.75
Record PreservationExchange Act rule 18a6 requires preservation of records.76
ReportingExchange Act rule 18a 7 requires certain reports.77
NotificationExchange Act rule 18a8 requires notification to the Commission when certain financial or operational problems occur.78
Daily Trading RecordsExchange Act section 15Fg requires SBS Entities to maintain daily trading records.79
Taken as a whole, the recordkeeping, reporting, and notification requirements that apply to SBS Entities with a prudential regulator are designed to promote the prudent operation of the firms security-based swap activities, assist the Commission in conducting compliance examinations of those activities, and alert the Commission to potential financial or operational problems that could impact the firm and its customers. The comparability assessment accordingly may focus on whether the analogous foreign requirementstaken as a whole produce comparable outcomes with regard to recordkeeping, reporting, notification, and related practices that support the Commissions oversight of these registrants. A foreign jurisdiction need not have analogues to every requirement under Commission rules to prohibitions in the cross-border context. Non-U.S.
SBSDs should assess the applicability of those prohibitions to their security-based swap businesses.
75 17 CFR 240.18a5. The Swiss Application discusses Swiss record making requirements. See Swiss Application section II.2.a. at 3347.
76 17 CFR 240.18a6. The Swiss Application discusses Swiss record preservation requirements.
See Swiss Application section II.2.b. at 4861.
77 17 CFR 240.18a7. The Swiss Application discusses Swiss requirements that address firms obligations to make certain reports. See Swiss Application section II.2.c. at 6264.
78 17 CFR 240.18a8. The Swiss Application discusses Swiss requirements that address firms obligations to make certain notifications. See Swiss Application section II.2.c. at 6466.
79 The Swiss Application discusses Swiss requirements that address firms record preservation obligations related to records that firms are required to create, as well as additional records such as records of communications. See Swiss Application section II.2.b. at 5052.

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receive a positive substituted compliance determination.
B. Preliminary Views and Proposed Order 1. General Considerations Based on the Swiss Application and the Commissions review of applicable provisions, in the Commissions preliminary view, the relevant Swiss requirements, subject to the conditions and limitations of the proposed Order, would produce regulatory outcomes that are comparable to the outcomes associated with the vast majority of the recordkeeping, reporting, and notification requirements under the Exchange Act applicable to SBS Entities with a prudential regulator pursuant to Exchange Act section 15Fg and Exchange Act rules 18a5, 18a6, 18a 7, and 18a8.
In reaching this preliminary conclusion, the Commission recognizes that there are certain differences between Swiss requirements and the Exchange Act requirements. In the Commissions preliminary view, on balance, those differences generally would not be inconsistent with substituted compliance for these requirements. Requirement-byrequirement similarity is not needed for substituted compliance.
However, the Commission is structuring its preliminary substituted compliance determinations in the proposed Order to provide Covered Entities with greater flexibility to select which distinct requirements within the broader rule for which they would apply substituted compliance. This would not preclude a Covered Entity from applying substituted compliance for the entire rule subject to conditions and limitations. However, it would permit the Covered Entity to apply substituted compliance with respect to certain requirements of a given rule and to comply directly with the remaining requirements. This granular approach to making substituted compliance determinations with respect to discrete requirements within Exchange Act rules 18a5, 18a6, 18a7, and 18a8
collectively, the recordkeeping, reporting, and notification rules is intended to permit Covered Entities to leverage existing recordkeeping and reporting systems that are designed to comply with the broker-dealer recordkeeping and reporting requirements on which the recordkeeping and reporting requirements applicable to SBS Entities are based. For example, it may be more efficient for a Covered Entity to comply with certain Exchange Act requirements
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