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Federal Register / Vol. 86, No. 155 / Monday, August 16, 2021 / Notices to the substantive Exchange Act requirement.87
In addition, certain of the requirements in Exchange Act rule 18a 5 are fully or partially linked to substantive Exchange Act requirements where a preliminary positive substituted compliance determination would be made under the proposed Order. In these cases, substituted compliance with the requirement in Exchange Act rule 18a-5 would be conditioned on the Covered Entity applying substituted compliance to the linked substantive Exchange Act requirement.88
In addition, the proposed Order would allow a Covered Entity to apply substituted compliance on a transactionby-transaction basis for the Commissions recordkeeping requirements that are linked with the counterparty protection requirements in Exchange Act rule 15Fh3h.89 This approach is intended to be consistent with the Commission preliminarily allowing Covered Entities to apply substituted compliance on a transactionby-transaction basis for the
Commissions counterparty protection requirements.
Under the proposed Order, substituted compliance in connection with the record making requirements of Exchange Act rule 18a-5 would be subject to the condition that the Covered Entity: 1 Preserves all of the data elements necessary to create the records required by Exchange Act rules 18a 5b1, 2, 3, and 7; and 2 upon request furnishes promptly to representatives of the Commission the records required by those rules SEC
Format Condition.90 This proposed condition is modeled on the alternative compliance mechanism in paragraph c of Exchange Act rule 18a5. In effect, a Covered Entity applying substituted compliance with respect to these requirements of Exchange Act rule 18a 5 would need to comply with the comparable Swiss requirements.
However, under the SEC Format Condition, the Covered Entity would need to produce a record that is formatted in accordance with the requirements of Exchange Act rule 18a 5 at the request of Commission staff.
The objective is to requireon a very
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limited basisthe production of a record that consolidates the information required by Exchange Act rules 18a 5b1, 2, 3, and 7 in a single record and, as applicable, in a blotter or ledger format. This will assist the Commission staff in reviewing the information on the record.
The following table summarizes the Commissions preliminary positive substituted compliance determinations with respect to requirements of Exchange Act rule 18a5 by listing in each row: 1 The paragraph of the proposed Order that sets forth the preliminary determination; 2 the paragraphs of Exchange Act rule 18a5 to which the preliminary determination applies; 3 a brief description of the records required by the paragraphs; and 4 a brief description of any additional conditions to applying substituted compliance to the requirements, including any partial exclusions because portions of the requirements are linked to substantive Exchange Act requirements for which the proposed Order would not provide substituted compliance.91

EXCHANGE ACT RULE 18a5
Record making Order paragraph d1iA
d1iB
d1iC
d1iD
d1iE
d1iF

d1iG
d1iH
d1iI

lotter on DSK11XQN23PROD with NOTICES1

d1iJ

Rule paragraph
Rule description
b1
b2
b3
b4
b5
b6
b11
b7
b8
b13

Trade blotters
Account ledgers
Stock record
Memoranda of brokerage orders
Memoranda of proprietary orders
Confirmations, trade verification

SEC
SEC
SEC
N/A.
N/A.
Rule
Accountholder information
Associated persons employment application Compliance with business conduct requirements.

b14i
b14ii

Portfolio reconciliation

SEC Format Condition.
N/A.
1 Rule 15Fh3h Condition.
2 Rule 15Fk1 Condition.
3 Rule 15Fh1 Exclusion.
4 Rule 15Fh2 Exclusion.
5 Rule 15Fh4 Exclusion.
6 Rule 15Fh5 Exclusion.
Rule 15Fi3 Condition.

87 A positive preliminary substituted compliance determination would not be made for the following requirements of Exchange Act rule 18a5 because they are linked to a substantive Exchange Act requirement for which the proposed Order would not provide substituted compliance: 1 Exchange Act rules 18a5b9 and 10 are fully linked to Exchange Act rule 18a4 and, therefore, would be subject to the Rule 18a4 Exclusion; 2 Exchange Act rule 18a5b12 is fully linked to Exchange Act rule 15Fh-6 and, therefore, would be subject to the Rule 15Fh6 Exclusion; 3 the portions of Exchange Act rule 18a5b13 that relates to Exchange Act rule 15Fh4 would be subject to the Rule 15Fh4 Exclusion; 4 the portion of Exchange Act rule 18a5b13 that relates to Exchange Act rule 15Fh5 would be subject to the 15Fh5
Exclusion; 5 the portion of Exchange Act rule 18a
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Additional conditions and partial exclusions
5b13 that relates to Exchange Act rule 15Fh1
would be subject to the 15Fh1 Exclusion; and 6
the portion of Exchange Act rule 18a5b13 that relates to Exchange Act rule 15Fh2 would be subject to the 15Fh2 Exclusion.
88 Substituted compliance with the following requirements of Exchange Act rule 18a5 would be conditioned on the Covered Entity applying substituted compliance to the linked substantive Exchange Act requirement: 1 Exchange Act rules 18a-5b6 and b11 are linked to Exchange Act rule 15Fi2 and, therefore, would be subject to the Rule 15Fi2 Condition; 2 Exchange Act rule 18a 5b13 is linked to Exchange Act rule 15Fh3 and, therefore, would be subject to the Rule 15Fh3h Condition; 3 Exchange Act rule 18a5b13 is linked to Exchange Act rule 15Fk-1, and therefore, would be subject to the Rule 15Fk1 Condition; 4

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Format Condition.
Format Condition.
Format Condition.

15Fi2 Condition.

Exchange Act rules 18a5b14i and ii are linked to Exchange Act rule 15Fi3 and, therefore, would be subject to the Rule 15Fi3 Condition; and 5 Exchange Act rule 18a5b14iii is linked to Exchange Act rule 15Fi4 and, therefore, would be subject to the Rule 15Fi4 Condition.
89 See para. d1iiB of the proposed Order.
90 See para. d1iiA of the proposed Order.
91 The chart below does not include the proposed conditions for applying substituted compliance to Exchange Act rule 18a5; namely that the Covered Entity: 1 Must be subject to and comply with specified requirements of foreign law; and 2 as discussed below, must promptly furnish to a representative of the Commission upon request an English translation of a record. See para. d7 of the proposed Order setting forth the English translation requirement.

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