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Federal Register / Vol. 86, No. 145 / Monday, August 2, 2021 / Notices
f1 or 2 of the Order, which, in the case of a Covered Entity that is prudentially regulated, also relates to the Covered Entitys business as a security-based swap dealer or major security-based swap participant, or 2 a deficiency relating to capital requirements.469 The commenter reasoned that the provisions of EU and French law requiring notification contained in paragraph f4 require notification of a far wider array of matters than those described in Exchange Act rule 18a8. The Commission disagrees. Exchange Act rule 18a8 requires security-based swap dealers and major security-based swap participants for which there is no prudential regulator to notify the Commission of a failure to meet minimum net capital. Exchange Act rule 18a8 also specifies several events that trigger a requirements that a securitybased swap dealer or major securitybased swap participant for which there is no prudential regulator must sent notice within twenty-four hours to the Commission. These notices are designed to provide the Commission with early warning that the SBS entity may experience financial difficulty.
Furthermore, Exchange Act rule 18a8
requires bank security-based swap dealers to give notice to the Commission when it files an adjustment of its reported capital category with its prudential regulator. Additional notification requirements arise with respect to the failure to maintain and keep current required books and records, the discovery of material weaknesses, and failure to make a required deposit into the special reserve account for the exclusive benefit of security-bases swap customers.470 While the specific EU and French requirements cited with respect to Exchange Act rule 18a8 are different from the specific requirements set forth in Exchange Act rule 18a8, the Commission believes the EU and French notice requirements cited in paragraph f4 of the Order provide for comparable regulatory outcomes by requiring notification of events or conditions which may impact an SBS
Entitys capital or signal the potential for financial difficulty, indicate the failure to maintain and keep current books and records, or the potential for the failure to comply with other requirements related to the protection of customer assets. The recommended revisions would reduce the scope of notifications the Commission would
receive. Consequently, the Commission is not making the recommended revisions with respect to paragraph f4.
The commenter also recommended revising paragraphs f2iH1, f3iA, and f3iiA to include the qualifier as applicable with respect to citations to CRR Reporting ITS annexes. The commenter stated that not all firms submit all of the CRR
Reporting ITS annexes.471 Accordingly, the Commission is modifying these paragraphs to include the qualifier as applicable. 472
2. Citations to EU and French Law The Commission also received comment recommending changes to the French Substituted Compliance Notice and Proposed Order to refine the scope of French law provisions that would operate as conditions to substituted compliance.473 The Commission reviewed each of the EU or French law citations that the commenter recommended adding or removing from the Order for relevance to the comparable Exchange Act requirement while also keeping in mind that each EU
or French law citation was included in the French Authorities Application intentionally. The Commissions conclusion and reasoning with respect to the commenters recommendations is discussed in further detail below. In addition to refining the scope of EU and French law citations in response to comment, the Order reflects changes to the EU and French law citations after cite checking the EU and French law provisions in the French Substituted Compliance Notice and Proposed Order against the EU and French law provisions cited in the French Authorities Application, as well as the UK implementation of the EU law provisions cited in the UK Proposed Order Granting Substituted Compliance in Connection with Certain Requirements Applicable to Non-U.S.
Security-Based Swap Dealers and Major Security-Based Swap Participants Subject to Regulation in the French Republic.
a. Global The commenter recommended deleting references to MiFID Org Reg, reasoning that these provisions could raise issues due to the discrepancy between Exchange Act requirements, which apply on an entity-level basis, and these EU requirements, which are 471 See
SIFMA Letter II at Appendix A.
paras. f2iH1, f3iA, and f3iiA of the Order.
473 See SIFMA Letter II at Appendix A. See also SIFMA Letter I at 47; FBF Letter at 23.

territorially limited. As explained in part III.C. above, conducting business outside France does not preclude a firm from relying on substituted compliance for the business it conducts within France. Accordingly, unless specified otherwise below, the Commission is not removing references to these EU and French law requirements from the Orders list of EU and French law requirements comparable to the Commissions recordkeeping, reporting, notification, and securities count requirements.
The commenter recommended deleting references to MiFID article 252 and MLD articles 11 and 13 and their French implementing provisions, which relate to customer information and suitability requirements, reasoning that these provisions do not correspond to, and go beyond, the Commissions recordkeeping, reporting, notification, and securities count requirements. The Commission agrees with the commenters reasoning, except with respect to Exchange Act rule 18a5a7
and b7 customer account records, Exchange Act rule 18a5a17 and b13 suitability record creation, and Exchange Act rule 18a6 b1xii suitability record preservation.
Therefore, the Commission is removing references to these requirements from the Orders list of EU and French law requirements comparable to the Commissions recordkeeping, reporting, notification, and securities count requirements, except for Exchange Act rules 18a5a7, a17, b7, and b13.474
The commenter recommended deleting references to MiFID Org Reg article 76, MiFID article 167 and its French implementing provisions, and MFC article L. 53310 III, which relate to the recording of telephone and electronic communications, reasoning that they do not correspond to, and go beyond, the requirements of the Commissions recordkeeping, reporting, notification, and securities count rules.
The Commission agrees with the commenters reasoning, except with respect to Exchange Act rules 18a 6b1iv and b2ii, which relate to communications including telephonic communications. Therefore, the Commission is removing references to these requirements from the Orders list of EU and French law requirements comparable to the Commissions recordkeeping, reporting, notification, and securities count requirements,
472 See
469 See 470 See
SIFMA Letter II at Appendix A.
Exchange Act rule 18a8, 17 CFR 240.18a
8.

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474 See paras. f1iD1, f1iG1, f1iI1, f2iA, f2iB, and f2iD
of the Order.

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