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Federal Register / Vol. 86, No. 149 / Friday, August 6, 2021 / Notices 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; 423
2 Exchange Act rule 15Fh5; 424 3
Exchange Act rule 15Fh6; 425 4
Exchange Act rule 18a2; 426 5
Exchange Act rule 18a4; and 6
Regulation SBSR.427
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 requirement of Exchange Act rule 18a6g.428 The Commission did not receive comment on this approach and the Order does not extend substituted compliance to these requirements.
Third, the Commission conditioned 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.429 In particular, substituted compliance for a provision of the Exchange Act Recordkeeping and Reporting Requirements that is linked to the following Exchange Act rules was conditioned on the SBS Entity applying substituted compliance to the linked substantive Exchange Act rule: 1
Exchange Act rule 15Fh3, except paragraphs a and d of the rule for which substituted compliance is not available; 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 18a3; 8 Exchange Act rule 18a5; and 9 Exchange Act rule 18a 7. The Commission did not receive comment on this approach and is adopting it as proposed.
The only difference is that the positive substituted compliance determination for Exchange Act rule 18a6b1viii is now conditioned on 423 17

CFR 240.15Fh4.
CFR 240.15Fh5.
425 17 CFR 240.15Fh6.
426 17 CFR 240.18a2.
427 17 CFR 242.900 et seq.
428 See UK Substituted Compliance Notice and Proposed Order, 86 FR at 18403404 discussing this condition.
429 See UK Substituted Compliance Notice and Proposed Order, 86 FR at 18395 discussing this condition.

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the Covered Entity applying substituted compliance for the requirements of Exchange Act rule 18a7a1, b, and c through h, and Exchange Act rule 18a7j 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.k. 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 preservation requirement.430 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 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 18a7a1.431 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.432
The Commission included the Rule 18a1 Condition as part of the substituted compliance determination for the daily trading records requirement of Exchange Act section 15Fg. A commenter asked that the condition be modified so that it applies only if the Covered Entity is not prudentially regulated and therefore 430 See
para. f3iD of the Order.
UK Substituted Compliance Notice and Proposed Order, 86 FR at 18399, 18417.
432 See UK Substituted Compliance Notice and Proposed Order, 86 FR at 18395 discussing this condition.
431 See
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subject to rule 18a1.433 Instead, the Commission is deleting this condition from the substituted compliance determination because these requirements are not important to monitoring or examining for compliance with Exchange Act rule 18a1.
Therefore, all Covered Entities whether or not subject to rule 18a1
can apply substituted compliance with respect to Exchange Act section 15Fg.
The Order otherwise 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.
Fifth, the proposed Order included a condition that Covered Entities must promptly furnish to a representative of the Commission upon request an English translation of any record, report, or notification of the Covered Entity that is required to be made, preserved, filed, or subject to examination pursuant to Exchange Act section 15F of this Order.434 The Commission did not receive a comment on this approach and the Order includes this condition.
Sixth, the Commission conditioned substituted compliance with Exchange Act rule 18a7 on Covered Entities filing periodic unaudited financial and operational information with the Commission or its designee in the manner and format required by Commission rule or order. Commenters made new suggestions about the scope and requirements of such a Commission order or rule in addition to reiterating comments previously made in response to the same condition in the German Substituted Compliance Order.435 First, if SBS Entities are required to prepare FOCUS Report Part II, and a positive substituted compliance determination is made with respect to the Commissions capital requirements, a commenter proposed that the Commission permit a Covered Entity to submit capital computations in a manner consistent with its home country capital standards and related reporting rules.436 Second, some commenters asked that Covered Entities be permitted to file their unaudited financial information less frequently e.g., quarterly and provide a later submission deadline to match the frequency of reporting and reporting deadlines required by the Covered 433 See
SIFMA 5/3/2021 Letter at 23.
UK Substituted Compliance Notice and Proposed Order, 86 FR at 18395 discussing this condition.
435 See SIFMA 5/3/2021 Letter Appendix B.
436 See SIFMA 5/3/2021 Letter Appendix B.
434 See
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