45770 Federal Register / Vol. 86, No. 155 / Monday, August 16, 2021 / Notices 

1See Docket No. RM2018–3, Order Adopting 

Final Rules Relating to Non-Public Information, 

June 27, 2018, Attachment A at 19–22 (Order No. 

4679). 

Document Room (PDR) at pdr.resource@

nrc.gov, or by calling the PDR at 1–800– 

397–4209, or from the Publicly 

Available Records System component of 

NRC’s Agencywide Documents Access 

and Management System (ADAMS), 

which is accessible from the NRC 

website at https://www.nrc.gov/readingrm/adams.html or https://www.nrc.gov/ 

reading-rm/doc-collections/#ACRS/. 

Dated: August 11, 2021. 

Russell E. Chazell, 

Federal Advisory Committee Management 

Officer, Office of the Secretary. 

[FR Doc. 2021–17444 Filed 8–13–21; 8:45 am] 

BILLING CODE 7590–01–P 

POSTAL REGULATORY COMMISSION 

[Docket Nos. MC2021–125 and CP2021–129] 

New Postal Products 

AGENCY: Postal Regulatory Commission. 

ACTION: Notice. 

SUMMARY: The Commission is noticing a 

recent Postal Service filing for the 

Commission’s consideration concerning 

a negotiated service agreement. This 

notice informs the public of the filing, 

invites public comment, and takes other 

administrative steps. 

DATES: Comments are due: August 18, 

2021. 

ADDRESSES: Submit comments 

electronically via the Commission’s 

Filing Online system at http://

www.prc.gov. Those who cannot submit 

comments electronically should contact 

the person identified in the FOR FURTHER

INFORMATION CONTACT section by 

telephone for advice on filing 

alternatives. 

FOR FURTHER INFORMATION CONTACT: 

David A. Trissell, General Counsel, at 

202–789–6820. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Introduction 

II. Docketed Proceeding(s) 

I. Introduction 

The Commission gives notice that the 

Postal Service filed request(s) for the 

Commission to consider matters related 

to negotiated service agreement(s). The 

request(s) may propose the addition or 

removal of a negotiated service 

agreement from the market dominant or 

the competitive product list, or the 

modification of an existing product 

currently appearing on the market 

dominant or the competitive product 

list. 

Section II identifies the docket 

number(s) associated with each Postal 

Service request, the title of each Postal 

Service request, the request’s acceptance 

date, and the authority cited by the 

Postal Service for each request. For each 

request, the Commission appoints an 

officer of the Commission to represent 

the interests of the general public in the 

proceeding, pursuant to 39 U.S.C. 505 

(Public Representative). Section II also 

establishes comment deadline(s) 

pertaining to each request. 

The public portions of the Postal 

Service’s request(s) can be accessed via 

the Commission’s website (http://

www.prc.gov). Non-public portions of 

the Postal Service’s request(s), if any, 

can be accessed through compliance 

with the requirements of 39 CFR 

3011.301.1

The Commission invites comments on 

whether the Postal Service’s request(s) 

in the captioned docket(s) are consistent 

with the policies of title 39. For 

request(s) that the Postal Service states 

concern market dominant product(s), 

applicable statutory and regulatory 

requirements include 39 U.S.C. 3622, 39 

U.S.C. 3642, 39 CFR part 3030, and 39 

CFR part 3040, subpart B. For request(s) 

that the Postal Service states concern 

competitive product(s), applicable 

statutory and regulatory requirements 

include 39 U.S.C. 3632, 39 U.S.C. 3633, 

39 U.S.C. 3642, 39 CFR part 3035, and 

39 CFR part 3040, subpart B. Comment 

deadline(s) for each request appear in 

section II. 

II. Docketed Proceeding(s) 

1. Docket No(s).: MC2021–125 and 

CP2021–129; Filing Title: USPS Request 

to Add Priority Mail Contract 719 to 

Competitive Product List and Notice of 

Filing Materials Under Seal; Filing 

Acceptance Date: August 10, 2021; 

Filing Authority: 39 U.S.C. 3642, 39 CFR 

3040.130 through 3040.135, and 39 CFR 

3035.105; Public Representative: 

Christopher C. Mohr; Comments Due: 

August 18, 2021. 

This Notice will be published in the 

Federal Register. 

Jennie L. Jbara, 

Alternate Certifying Officer. 

[FR Doc. 2021–17452 Filed 8–13–21; 8:45 am] 

BILLING CODE 7710–FW–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92632; File No. S7–07–21] 

Notice of Substituted Compliance 

Application Submitted by UBS AG and 

Credit Suisse AG in Connection With 

Certain Requirements Applicable to 

Non-U.S. Security-Based Swap Dealers 

Subject to Regulation in the Swiss 

Confederation; Proposed Order 

August 10, 2021. 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Notice of application for 

substituted compliance determination; 

proposed order. 

SUMMARY: The Securities and Exchange 

Commission (‘‘Commission’’) is 

soliciting public comment on an 

application by UBS AG and Credit 

Suisse AG (the ‘‘Swiss Firms’’) 

requesting that, pursuant to rule 3a71– 

6 under the Securities Exchange Act of 

1934 (‘‘Exchange Act’’), the Commission 

determine that registered security-based 

swap dealers (‘‘SBSDs’’) that are not 

U.S. persons and that are subject to 

certain regulation in the Swiss 

Confederation (‘‘Switzerland’’) may 

comply with certain requirements under 

the Exchange Act via compliance with 

corresponding requirements of 

Switzerland. The Commission also is 

soliciting comment on a proposed Order 

providing for conditional substituted 

compliance in connection with the 

application. 

DATES: Submit comments on or before 

September 10, 2021. 

ADDRESSES: Comments may be 

submitted by any of the following 

methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (https://www.sec.gov/ 

rules/submitcomments.htm); or 

• Send an email to rule-comments@

sec.gov. Please include File Number S7– 

07–21 on the subject line. 

Paper Comments 

• Send paper comments to Vanessa 

A. Countryman, Secretary, Securities 

and Exchange Commission, 100 F Street 

NE, Washington, DC 20549–1090. 

All submissions should refer to File 

Number S7–07–21. This file number 

should be included on the subject line 

if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (http://www.sec.gov/ 


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1See Exchange Act Release No. 86175 (June 21, 

2019), 84 FR 43872, 43954 (Aug. 22, 2019) (‘‘Capital 

and Margin Adopting Release’’); see also Exchange 

Act Release No. 87780 (Dec. 18, 2019), 85 FR 6270, 

6345–49 (Feb. 4, 2020). 

2 17 CFR 240.3a71–6. 

3 15 U.S.C. 78o–10. 

4The Commission also has discussed the 

parameters of substituted compliance in connection 

with substituted compliance requests regarding the 

Federal Republic of Germany (‘‘Germany’’), the 

French Republic (‘‘France’’), and the United 

Kingdom (‘‘UK’’). See Exchange Act Release No. 

90378 (Nov. 9, 2020), 85 FR 72726 (Nov. 13, 2020) 

(‘‘German Notice and Proposed Order’’); Exchange 

Act Release No. 90765 (Dec. 22, 2020), 85 FR 85686 

(Dec. 29, 2020) (‘‘German Substituted Compliance 

Order’’); Exchange Act Release No. 90766 (Dec. 22, 

2020), 85 FR 85720 (Dec. 29, 2020) (‘‘French Notice 

and Proposed Order’’); Exchange Act Release No. 

91477 (Apr. 5, 2021), 86 FR 18341 (Apr. 8, 2021) 

(‘‘French Reopening Release’’); Exchange Act 

Release No. 92484 (July 23, 2021), 86 FR 41612 

(Aug. 2, 2021) (‘‘French Substituted Compliance 

Order’’); Exchange Act Release No. 91476 (Apr. 5, 

2021), 65 FR 18378 (Apr. 8, 2021) (‘‘UK Notice and 

Proposed Order’’); Exchange Act Release No. 92529 

(July 30, 2021), 86 FR 43318 (Aug. 6, 2021) (‘‘UK 

Substituted Compliance Order’’). 

5See Exchange Act rule 3a71–6(d). Substituted 

compliance is not available for antifraud 

prohibitions and information-related requirements 

under section 15F. See Exchange Act rule 3a71– 

6(d)(1) (specifying that substituted compliance is 

not available in connection with the antifraud 

provisions of Exchange Act section 15F(h)(4)(A) 

and Exchange Act rule 15Fh–4(a), 17 CFR 

240.15Fh–4(a), and the information-related 

provisions of Exchange Act sections 15F(j)(3) and 

15F(j)(4)(B)). Substituted compliance under rule 

3a71–6 also does not extend to certain other 

provisions of the federal securities laws that apply 

to security-based swaps, such as: (1) Additional 

antifraud prohibitions (see Exchange Act section 

10(b), 15 U.S.C. 78j(b), Exchange Act rule 10b–5, 17 

CFR 240.10b–5, and Securities Act of 1933 section 

17(a), 15 U.S.C. 77q(a)); (2) requirements related to 

transactions with counterparties that are not eligible 

contract participants (‘‘ECPs’’) (see Exchange Act 

section 6(l), 15 U.S.C. 78f(l); Securities Act of 1933 

section 5(e), 15 U.S.C. 77e(e)); (3) segregation of 

customer assets (see Exchange Act section 3E, 15 

U.S.C. 78c–5; Exchange Act rule 18a–4, 17 CFR 

240.18a–4); (4) required clearing upon counterparty 

election (see Exchange Act section 3C(g)(5), 15 

U.S.C. 78c–3(g)(5)); (5) regulatory reporting and 

public dissemination (see generally Regulation 

SBSR, 17 CFR 242.900 et seq.); (6) SBS Entity 

registration (see Exchange Act section 15F(a) and 

(b)); and (7) registration of offerings (see Securities 

Act of 1933 section 5, 15 U.S.C. 77e). 

6See Exchange Act rule 3a71–6(a)(2)(i). 

7See Exchange Act rule 3a71–6(a)(2)(ii). The 

Commission and FINMA are in the process of 

negotiating a memorandum of understanding to 

address cooperation matters related to substituted 

compliance. The memorandum of understanding or 

other arrangement will need to be in place before 

the Commission may make a final determination 

allowing Covered Entities (as defined herein) to use 

substituted compliance to satisfy obligations under 

the Exchange Act. The Commission expects to 

publish any such memorandum of understanding or 

arrangement on its website at www.sec.gov under 

the ‘‘Substituted Compliance’’ tab, which is located 

on the ‘‘Security-Based Swap Markets’’ page in the 

Division of Trading and Markets section of the site. 

8See 17 CFR 240.15Fb2–4(c)(1); Exchange Act 

rule 3a71–6(c)(1)(ii). In the Commission;s view the 

Swiss Firms have satisfied this prerequisite. See 

Letter from Colin Lloyd of Cleary Gottlieb Steen & 

Hamilton LLP on behalf of UBS AG and Credit 

Suisse AG to Vanessa Countryman, Secretary, 

Commission, dated August 10, 2021 (‘‘Swiss 

Application’’). The Swiss Firms’ Application is 

available on the Commission’s website at: https:// 

www.sec.gov/page/exchange-act-substitutedcompliance-and-listed-jurisdiction-applicationssecurity-based-swap. 

9 17 CFR 240.0–13. 

10See Commission rule 0–13(h). The Commission 

may take final action on a substituted compliance 

application no earlier than 25 days following 

publication of the notice in the Federal Register. 

See id. 

11See Swiss Application sections I–IV. 

rules/proposed.shtml). Typically, 

comments are also available for viewing 

and printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. Due to pandemic 

conditions, however, access to the 

Commission’s Public Reference Room is 

not permitted at this time. All 

comments received will be posted 

without change. Persons submitting 

comments are cautioned that the 

Commission does not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make publicly available. 

FOR FURTHER INFORMATION CONTACT: 

Carol M. McGee, Assistant Director or 

James R. Curley, Special Counsel, at 

202–551–5870, Office of Derivatives 

Policy, Division of Trading and Markets, 

Securities and Exchange Commission, 

100 F Street NE, Washington, DC 

20549–7010. 

SUPPLEMENTARY INFORMATION: The 

Commission is soliciting public 

comment on an application by the Swiss 

Firms requesting that the Commission 

determine that SBSDs that are not U.S. 

persons and that are subject to certain 

regulation in Switzerland may satisfy 

certain requirements under the 

Exchange Act by complying with 

comparable requirements in 

Switzerland. The Commission also is 

soliciting comment on a proposed 

Order, set forth in Attachment A, 

providing for conditional substituted 

compliance in connection with the 

application. 

I. Background 

On August 6, 2021, market 

participants will begin to count 

security-based swap transactions toward 

the thresholds for registration with the 

Commission as SBSDs.1 Exchange Act 

rule 3a71–6 2 conditionally provides 

that non-U.S. SBSDs and major securitybased swap participants (‘‘SBS 

Entities’’) may satisfy certain 

requirements under Exchange Act 

section 15F 3 by complying with 

comparable regulatory requirements of a 

foreign jurisdiction.4 Substituted 

compliance potentially is available in 

connection with requirements regarding 

business conduct and supervision, chief 

compliance officers, trade 

acknowledgment and verification, nonprudentially regulated capital and 

margin, recordkeeping and reporting, 

portfolio reconciliation and dispute 

reporting, portfolio compression and 

trading relationship documentation.5

Substituted compliance in part is 

predicated on the Commission 

determining the analogous foreign 

requirements are ‘‘comparable’’ to the 

applicable requirements under the 

Exchange Act, after accounting for 

factors such as the ‘‘scope and 

objectives’’ of the relevant foreign 

regulatory requirements and the 

effectiveness of the relevant foreign 

authority’s or authorities’ supervisory 

and enforcement frameworks.6

Substituted compliance further requires 

that the Commission and the relevant 

foreign financial regulatory authorities 

have entered into an effective 

supervisory and enforcement 

memorandum of understanding and/or 

other arrangement addressing 

cooperation and other matters related to 

substituted compliance.7

A party or group of parties that may 

potentially rely on a substituted 

compliance order may submit a 

substituted compliance application only 

if each such party provides a 

certification and opinion of counsel that 

the entity can, ‘‘as a matter of law, 

provide the Commission with prompt 

access to its books and records, and can, 

as a matter of law, submit to onsite 

inspection and examination by the 

Commission.’’ 8 Commission rule 0–13 9

addresses procedures for filing 

substituted compliance applications. 

The rule provides that the Commission 

will publish a notice when a completed 

application has been submitted and that 

any person may submit to the 

Commission ‘‘any information that 

relates to the Commission action 

requested in the application.’’ 10

II. The Swiss Firms’ Substituted 

Compliance Request 

The Swiss Firms have submitted a 

complete substituted compliance 

application to the Commission (‘‘Swiss 

Application’’).11 Pursuant to rule 0–13, 

the Commission is publishing notice of 

the Swiss Application together with a 

proposed Order to conditionally grant 

substituted compliance to an entity that 

(1) is a security-based swap dealer 

registered with the Commission; (2) is 

not a ‘‘U.S. person,’’ as that term is 

defined in rule 3a71–3(a)(4) under the 


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45772 Federal Register / Vol. 86, No. 155 / Monday, August 16, 2021 / Notices 

12 17 CFR 240.3a71–3(a)(4). 

13See para. (d)(1) of the proposed Order. 

14See part V, infra. 

15See part VI, infra. 

16See part VII, infra. 

17See Swiss Application section II at 3. 

18 In this context, the Commission recognizes that 

other regulatory regimes will have exclusions, 

exceptions and exemptions that may not align 

perfectly with the corresponding requirements 

under the Exchange Act. Where the Commission 

preliminarily has found that the Swiss regime 

produces comparable outcomes notwithstanding 

those particular differences, the Commission 

proposes to make a positive determination on 

substituted compliance. Where the Commission 

preliminarily has found that those exclusions, 

exemptions and exceptions lead to outcomes that 

are not comparable, however, the proposed Order 

would not provide for substituted compliance. 

19See para. (e)(1)(i) and (ii) of the proposed 

Order. 

20See para. (e)(1)(iii) of the proposed Order. 

21See para. (e)(1)(iv) of the proposed Order. 

Exchange Act; 12 (3) is a systemically 

important bank authorized by the Swiss 

Financial Market Supervisory Authority 

(‘‘FINMA’’) to conduct banking 

activities in Switzerland; and (4) is 

supervised by FINMA under the 

intensive and continual supervision 

model as a Category 1 firm as that term 

is defined in BO Annex 3. In making its 

substituted compliance determination, 

the Commission will consider public 

comments on the Swiss Application and 

the proposed Order. 

The Swiss Firms seek substituted 

compliance for Swiss market 

participants in connection with a 

number of requirements under 

Exchange Act section 15F, including: 

A. Relevant Market Participants 

The Commission will consider 

whether to allow substituted 

compliance to be used by any Covered 

Entity.13

B. Relevant Section 15F Requirements 

The Swiss Firms request that the 

Commission issue an order determining 

that—for substituted compliance 

purposes—applicable requirements in 

Switzerland are comparable with the 

following requirements under Exchange 

Act section 15F: 

• Risk control requirements— 

Requirements related to internal risk 

management, trade acknowledgment 

and verification, portfolio reconciliation 

and dispute reporting, portfolio 

compression and trading relationship 

documentation.14

• Internal supervision, chief 

compliance officer and additional 

Exchange Act section 15F(j) 

requirements—Requirements related to 

diligent supervision, conflicts of 

interest, information gathering under 

Exchange Act section 15F(j) and chief 

compliance officers.15

• Recordkeeping, reporting, and 

notification requirements— 

Requirements related to making and 

keeping current certain prescribed 

records, the preservation of records, 

reporting, and notification.16

C. Comparability Considerations and 

Proposed Order 

In the view of the Swiss Firms, Swiss 

requirements taken as a whole produce 

regulatory outcomes that are comparable 

to those of the relevant requirements 

under the Exchange Act.17 In the 

Commission’s preliminary view, 

requirements under the Exchange Act 

and Swiss requirements maintain 

similar approaches with respect to 

achieving regulatory goals in several 

respects, but follow differing 

approaches or incorporate disparate 

elements in certain other respects. The 

Commission has considered those 

similarities and differences when 

analyzing comparability and developing 

preliminary views, while recognizing 

that differences in approach do not 

necessarily preclude substituted 

compliance in light of the Commission’s 

holistic, outcomes-oriented framework 

for assessing comparability.18

Based on the Commission’s analysis 

of the Swiss Application and review of 

relevant Swiss requirements, the 

Commission is proposing an Order, 

located at Attachment A, granting 

substituted compliance subject to 

specific conditions and limitations. 

When Covered Entities seek to rely on 

substituted compliance to satisfy 

particular requirements under the 

Exchange Act, non-compliance with the 

applicable Swiss requirements would 

lead to a violation of those requirements 

under the Exchange Act and potential 

enforcement action by the Commission 

(as opposed to automatic revocation of 

the substituted compliance order). 

III. Scope of Substituted Compliance 

The Swiss Application relates solely 

to entity-level requirements and for 

entity-level Exchange Act requirements 

a Covered Entity must choose either to 

apply substituted compliance pursuant 

to the Order with respect to all securitybased swap business subject to the 

relevant Swiss requirements or to 

comply directly with the Exchange Act 

with respect to all such business; a 

Covered Entity may not choose to apply 

substituted compliance for some of the 

business subject to the relevant Swiss 

requirements and comply directly with 

the Exchange Act for another part of the 

business that is subject to the relevant 

Swiss requirements. Additionally, for 

entity-level Exchange Act requirements, 

if the Covered Entity also has securitybased swap business that is not subject 

to the relevant Swiss requirements, the 

Covered Entity must either comply 

directly with the Exchange Act for that 

business or comply with the terms of 

another applicable substituted 

compliance order. 

IV. Applicable Entities and General 

Conditions 

A. Covered Entities for Which the 

Commission is Proposing a Positive 

Conditional Substituted Compliance 

Determination 

Under the proposed Order, 

substituted compliance would be 

available to ‘‘Covered Entities’’—a term 

that would limit the scope of the 

substituted compliance determination to 

SBSDs that are subject to applicable 

Swiss requirements and oversight. 

Consistent with the parameters of 

substituted compliance under Exchange 

Act rule 3a71–6, the proposed ‘‘Covered 

Entity’’ definition provides that the 

relevant entity must be a security-based 

swap dealer registered with the 

Commission, and that the entity cannot 

be a U.S. person.19 The proposed 

‘‘Covered Entity’’ definition further 

would provide that the entity must be 

a systemically important bank 

authorized by FINMA to conduct 

banking activities in Switzerland.20

Each entity also must be supervised by 

FINMA under the intensive and 

continual supervision model as a 

Category 1 firm as that term is defined 

in BO Annex 3.21 These prongs of the 

definition are intended to help ensure 

that Covered Entities are subject to 

relevant Swiss requirements and 

oversight. 

B. General Conditions and Prerequisites 

Substituted compliance under the 

proposed Order would be subject to a 

number of conditions and other 

prerequisites, to help ensure that the 

relevant Swiss requirements that form 

the basis for substituted compliance in 

practice will apply to the SBSD’s 

security-based swap business and 

activities, and to promote the 

Commission’s oversight over entities 

that avail themselves of substituted 

compliance. 

1. ‘‘Subject to and complies with’’ 

Applicable Provisions 

Each relevant section of the proposed 

Order would be subject to the condition 

that the Covered Entity ‘‘is subject to 

and complies with’’ the applicable 

Swiss requirements that are needed to 

establish comparability. Accordingly, 


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22An SBSD’s ‘‘voluntary’’ compliance with the 

relevant Swiss requirements would not suffice for 

these purposes. Substituted compliance reflects an 

alternative means by which an SBSD may comply 

with applicable requirements under the Exchange 

Act, and thus mandates that the SBSD be subject 

to the requirements needed to establish 

comparability and face consequences arising from 

any failure to comply with those requirements. 

Moreover, the comparability assessment takes into 

account the effectiveness of the supervisory 

compliance program administered and the 

enforcement authority exercised by FINMA, which 

would not be expected to promote comparable 

outcomes when compliance merely is ‘‘voluntary.’’ 

23See para. (a)(1) of the proposed Order. 

24See para. (a)(2) of the proposed Order. 

25See para. (a)(3) of the proposed Order. 

26See para. (a)(4) of the proposed Order. 

27See para. (a)(5) of the proposed Order. 

28See para. (a)(6) of the proposed Order. 

29See para. (a)(7) of the proposed Order. 

30See para. (a)(8) of the proposed Order. 

31See para. (a)(9) of the proposed Order. 

32 If the Covered Entity intends to rely on all the 

substituted compliance determinations in a given 

paragraph of the proposed Order, it can cite that 

paragraph in the notice. For example, if the Covered 

Entity intends to rely on the risk control 

determinations in paragraph (b) of the proposed 

Order, it would indicate in the notice that it is 

relying on the determinations in paragraph (b). 

However, if the Covered Entity intends to rely on 

the internal risk management, trade 

acknowledgement and verification, and portfolio 

reconciliation determinations but not the portfolio 

compression determination, it would need to 

indicate in the notice that it is relying on 

paragraphs (b)(1)–(3) of the proposed Order. In this 

case, paragraph (b)(4) of the proposed Order (the 

portfolio compression determination) would be 

excluded from the notice and the Covered Entity 

would need to comply with the Exchange Act 

portfolio compression requirements. Further, as 

discussed below in section VII.B of this notice, the 

recordkeeping and reporting determinations in the 

proposed Order have been structured to provide 

Covered Entities with a high level of flexibility in 

selecting specific requirements within those rules 

for which they want to rely on substituted 

compliance. For example, paragraph (d)(1)(i) of the 

proposed Order sets forth the Commission’s 

preliminary substituted compliance determinations 

with respect to the requirements of Exchange Act 

rule 18a–5, 17 CFR 240.18a–5. These proposed 

determinations are set forth in paragraphs 

(d)(1)(i)(A) through (O). If a Covered Entity intends 

to rely on some but not all of the determinations, 

it would need to identify in the notice the specific 

determinations in this paragraph it intends to rely 

on (e.g., paragraphs (d)(1)(i)(A), (B), (C), (D), (G), 

(H), (I), and (O)). For any determinations excluded 

from the notice, the Covered Entity would need to 

comply with the Exchange Act rule 18a–5 

requirement. 

33A Covered Entity would modify its reliance on 

the positive substituted compliance determinations 

in the proposed Order, and thereby trigger the 

requirement to update its notice, if it adds or 

subtracts determinations for which it is applying 

substituted compliance or completely discontinues 

its reliance on the proposed Order. 

the proposed Order would not provide 

substituted compliance when a Covered 

Entity is excused from compliance with 

relevant foreign provisions, such as, for 

example, if relevant Swiss requirements 

do not apply to the security-based swap 

activities of a branch of a Swiss SBSD 

located outside of Switzerland. In that 

event, the Covered Entity would not be 

‘‘subject to’’ those requirements, and the 

Covered Entity could not rely on 

substituted compliance in connection 

with those activities.22

2. Additional General Conditions 

Substituted compliance under the 

proposed Order would be subject to the 

following general conditions intended 

to help ensure the applicability of 

relevant Swiss requirements. In 

particular: 

• Security-based swaps and 

transactions as ‘‘derivatives’’ or 

‘‘derivative transactions’’—For each 

condition in paragraphs (b) through (d) 

of this Order that requires the 

application of, and the Covered Entity’s 

compliance with, provisions of FinMIA 

and FMIO, the relevant security-based 

swaps and security-based swap 

transactions are ‘‘derivatives’’ and/or 

‘‘derivative transactions’’ for purposes 

of FinMIA article 2(c), or otherwise are 

described by the relevant language of 

that provision.23

• ‘‘Counterparty’’ status—For each 

condition in paragraph (b) through (d) of 

this Order that requires the application 

of, and the Covered Entity’s compliance 

with, the provisions of FinMIA and 

FMIO, the Covered Entity complies with 

the applicable conditions of the Order 

regardless of whether the Covered 

Entity’s counterparty is a 

‘‘counterparty’’ for purposes of FinMIA 

article 93, or otherwise is described by 

the relevant language of that 

provision.24

• Counterparty status as 

‘‘company’’—For each condition in 

paragraph (b) through (d) of this Order 

that requires the application of, and the 

Covered Entity’s compliance with, the 

provisions of FMIO, the Covered Entity 

complies with the applicable conditions 

of the Order regardless of whether a 

Covered Entity’s counterparty is a 

‘‘company’’ for purposes of FMIO article 

77, or otherwise is described by the 

relevant language of that provision.25

• Covered Entity as ‘‘bank’’—For each 

condition in paragraph (b) through (d) of 

this Order that requires the application 

of, and the Covered Entity’s compliance 

with, the provisions of the BA and BO 

and/or other Swiss requirements 

adopted pursuant to those provisions, 

the Covered Entity is a ‘‘bank’’ for 

purposes of BA article 1a, or otherwise 

is described by the relevant language of 

that provision.26

• Covered Entity as ‘‘systemically 

important’’—For each condition in 

paragraph (b) through (d) of this Order 

that requires the application of, and the 

Covered Entity’s compliance with, the 

provisions of the FINMA Circular 2017/ 

1, the Covered Entity is ‘‘systemically 

important’’ for purposes of BA article 

8(3), or otherwise is described by the 

relevant language of that provision.27

• Covered Entity as ‘‘category 1’’—For 

each condition in paragraph (b) through 

(d) of this Order that requires the 

application of, and the Covered Entity’s 

compliance with, the provisions of 

FINMA Circular 2017/1, the Covered 

Entity is supervised as ‘‘category 1,’’ as 

defined in BO articles 2(2) and 2(3) and 

BO Annex 3, or otherwise is described 

by the relevant language of those 

provisions.28

• ‘‘Institution-specific approach’’ to 

operational risk quantification—For 

each condition in paragraphs (b) 

through (d) of this Order that requires 

the application of, and the Covered 

Entity’s compliance with, the provisions 

of FINMA Circular 2008/21 margins 45– 

107, the Covered Entity applies the 

‘‘institution-specific approach’’ to 

quantifying capital requirements for 

operational risk, as defined in CAO 

article 94, or otherwise is described by 

the relevant language of those 

provisions, and as approved by 

FINMA.29

• Memorandum of understanding— 

The Commission has an applicable 

memorandum of understanding or other 

arrangement with FINMA addressing 

cooperation with respect of the 

proposed Order at the time the Covered 

Entity makes use of substituted 

compliance.30

• Notice of reliance on substituted 

compliance—A Covered Entity must 

provide notice of its intent to rely on the 

proposed Order by notifying the 

Commission in the manner specified on 

the Commission’s website.31 In the 

notice, the Covered Entity would need 

to identify each specific substituted 

compliance determination in the 

proposed Order for which the Covered 

Entity intends to apply substituted 

compliance.32 If a Covered Entity elects 

not to apply substituted compliance 

with respect to a specific substituted 

compliance determination in the 

proposed Order, it must comply with 

the Exchange Act requirements subject 

to that determination. Finally, a Covered 

Entity must promptly update its notice 

to the Commission if it intends to 

modify its reliance on the positive 

substituted compliance determinations 

in the proposed Order.33

• Notification related to changes in 

capital category—Covered Entities with 

a prudential regulator would need to 

apply substituted compliance with 

respect to the requirements of Exchange 


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34See para. (a)(10) of the proposed Order. 

35 17 CFR 240.18a–8(c). 

36See FINMASA article 29(2); CAO articles 14, 

42(3), 101, and 130(4); and Liquidity Ordinance 

articles 17b, and 26(2). 

37 17 CFR 240.15Fh–3(h)(2)(iii)(I). 

38See Exchange Act Release No. 68071 (Oct. 18, 

2012), 77 FR 70214, 70250 (Nov. 23, 2012). The 

Swiss Application discusses Swiss requirements 

that address Covered Entities’ obligations related to 

internal risk management. See Swiss Application 

section II.1.a at 5–8. 

39 17 CFR 240.15Fi–2. 

40See Exchange Act Release No. 78011 (June 8, 

2016), 81 FR 39808, 39809 & 39820 (June 17, 2016) 

(‘‘Trade Acknowledgment and Verification 

Adopting Release’’). The Swiss Application 

discusses Swiss requirements that address Covered 

Entities’ obligations related to confirmations. See 

Swiss Application section II.1.b at 9–16. 

41 17 CFR 240.15Fi–3. 

42See Exchange Act Release No. 87782 (Dec. 18, 

2019), 85 FR 6359, 6360–61 (Feb. 4, 2020) (‘‘Risk 

Mitigation Adopting Release’’). The Swiss 

Application discusses Swiss requirements that 

address portfolio reconciliation and dispute 

resolution and reporting. See Swiss Application 

section II.1.c at 17–23. 

43 17 CFR 240.15Fi–4. 

44See Risk Mitigation Adopting Release, 85 FR at 

6361. The Swiss Application discusses Swiss 

portfolio compression requirements. See Swiss 

Application section II.1.c at 17–19, 23–24. 

45 17 CFR 240.15Fi–5. 

46See Risk Mitigation Adopting Release, 85 FR at 

6361. The Swiss Application discusses Swiss 

requirements regarding records of agreements with 

counterparties. See Swiss Application section II.1.c 

at 17–19, 24–31. 

47See para. (b)(1) of the proposed Order (listing 

the requirements a Covered Entity must be subject 

to and comply with in connection with internal risk 

management); para. (b)(2) (listing the requirements 

a Covered Entity must be subject to and comply 

with in connection with trade acknowledgement 

and verification); para. (b)(3) (listing the 

requirements a Covered Entity must be subject to 

and comply with in connection with portfolio 

reconciliation); and para. (b)(4) (listing the 

requirements a Covered Entity must be subject to 

and comply with in connection with portfolio 

compression). 

48See para. (b)(3) of the proposed Order 

(excluding Exchange Act rule 15Fi–3(c) covering 

reporting of security-based swap valuation disputes 

Act rule 18a–8(c) and the requirements 

of Exchange Act rule 18a–8(h) as 

applied to Exchange Act rule (c).34

Exchange Act rule 18a–8(c) generally 

requires every security-based swap 

dealer with a prudential regulator that 

files a notice of adjustment of its 

reported capital category with the 

Federal Reserve Board, the Office of the 

Comptroller of the Currency, or the 

Federal Deposit Insurance Corporation 

to give notice of this fact to the that 

same day by transmitting a copy to the 

Commission of the notice of adjustment 

of reported capital category in 

accordance with Exchange Act rule 18a– 

8(h).35 Exchange Act rule 18a–8(h) sets 

forth the manner in which every notice 

or report required to be given or 

transmitted pursuant to Exchange Act 

rule 18a–8 must be made. While 

Exchange Act rule 18a–8(c) is not linked 

to an Exchange Act capital requirement, 

it is linked to capital requirements in 

the U.S. promulgated by the prudential 

regulators. In its application, the Swiss 

Firms cited various Swiss provisions as 

providing similar outcomes to the 

notifications requirements of Exchange 

Act Rule 18a–8.36 This general 

condition would be designed to clarify 

that a prudentially regulated Covered 

Entity must provide the Commission 

with copies of any notifications 

regarding changes in the Covered 

Entity’s capital situation required by 

Swiss law. The intent is to align the 

notification requirement with the Swiss 

capital requirements applicable to the 

Covered Entity. 

V. Substituted Compliance for Risk 

Control Requirements 

A. Swiss Firms’ Request and Associated 

Analytic Considerations 

The Swiss Application in part 

requests substituted compliance in 

connection with risk control 

requirements under the Exchange Act 

relating to: 

• Internal risk management—Internal 

risk management system requirements 

pursuant to Exchange Act section 

15F(j)(2) and relevant aspects of 

Exchange Act rule 15Fh–3(h)(2)(iii)(I).37

Those provisions address the obligation 

of SBSDs to follow policies and 

procedures reasonably designed to help 

manage the risks associated with their 

business activities.38

• Trade acknowledgment and 

verification—Trade acknowledgment 

and verification requirements pursuant 

to Exchange Act section 15F(i) and 

Exchange Act rule 15Fi–2.39 Those 

provisions help avoid legal and 

operational risks by requiring definitive 

written records of transactions and for 

procedures to avoid disagreements 

regarding the meaning of transaction 

terms.40

• Portfolio reconciliation and dispute 

reporting—Portfolio reconciliation 

requirements pursuant to Exchange Act 

section 15F(i) and Exchange Act rule 

15Fi–3.41 Those provisions require that 

counterparties engage in portfolio 

reconciliation and resolve discrepancies 

in connection with uncleared securitybased swaps and promptly notify the 

Commission and applicable prudential 

regulators regarding certain valuation 

disputes.42

• Portfolio compression—Portfolio 

compression requirements pursuant to 

Exchange Act section 15F(i) and 

Exchange Act rule 15Fi–4.43 Those 

provisions require that SBSDs have 

procedures addressing bilateral offset, 

bilateral compression and multilateral 

compression in connection with 

uncleared security-based swaps.44

• Trading relationship 

documentation—Trading relationship 

documentation requirements pursuant 

to Exchange Act section 15F(i) and 

Exchange Act rule 15Fi–5.45 Those 

provisions require that SBSDs have 

procedures to execute written securitybased swap trading relationship 

documentation with their counterparties 

prior to, or contemporaneously with, 

executing certain security-based 

swaps.46

Taken as a whole, these risk control 

requirements help to promote market 

stability by mandating that SBSDs 

follow practices that are appropriate to 

manage the market, credit, counterparty, 

operational and legal risks associated 

with their security-based swap 

businesses. The Commission’s 

comparability assessment accordingly 

focuses on whether the analogous 

foreign requirements—taken as a 

whole—produce comparable outcomes 

with regard to providing that Covered 

Entities follow risk mitigation and 

documentation practices that are 

appropriate to the risks associated with 

their security-based swap businesses. 

B. Preliminary Views and Proposed 

Order 

1. General considerations 

In the Commission’s preliminary view 

based on the Swiss Application and the 

Commission’s review of applicable 

provisions, relevant Swiss requirements 

would produce regulatory outcomes that 

are comparable to those associated with 

the internal risk management, trade 

acknowledgement and verification, 

portfolio reconciliation, and portfolio 

compression risk control requirements, 

by subjecting Covered Entities to risk 

mitigation and documentation practices 

that are appropriate to the risks 

associated with those elements of their 

security-based swap businesses. 

Substituted compliance for those risk 

control requirements accordingly would 

be conditioned on Covered Entities 

being subject to and complying with the 

Swiss provisions that in the aggregate 

establish a framework that produces 

outcomes comparable to those 

associated with the analogous risk 

control requirements under the 

Exchange Act.47

In connection with dispute reporting, 

the Commission preliminarily believes 

that Swiss requirements are not 

comparable to Exchange Act 

requirements.48 Paragraph (c) of 


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from the risk control provisions covered by the 

proposed Order). 

49See 17 CFR 240.15Fi–3(c). 

50See Swiss Application section II.1.c at 17, 22– 

23 (noting that [t]he key difference between [Swiss 

and US portfolio reconciliation] requirements is the 

reporting of valuation disputes, which Swiss law 

does not require to be reported to the Commission 

. . . the Commission may consider granting the 

requested substituted compliance determination on 

the condition that a Swiss bank would comply with 

the Commission’s reporting requirement for 

disputes with respect to more than USD $20 million 

pursuant to Exchange Act rule 15Fi–3(c) with 

respect to U.S. person counterparties’’). 

51See para. (b)(4)(i) of the proposed Order. 

52See para. (b)(4)(ii) of the proposed Order. 

53The voluntary ‘‘standard Swiss market practice 

to document OTC derivatives transactions through 

written agreements’’ described in the Swiss 

Application does not establish the requisite 

supervisory framework or enforcement authority to 

establish comparability with the specific regulatory 

requirements of Exchange Act section 15Fi–5. See 

Swiss Application section II.1.c at 24. 

54 17 CFR 240.15Fi–5(b)(1). 

55See Swiss Application section II.1.c at 24. 

56 17 CFR 240.15Fi–5(a)(2). 

57See Swiss Application section II.1.c at 18, 28– 

29. 

58See id. at 30. 

59 17 CFR 240.15Fh–3(h). 

60 The Swiss Application addresses Swiss 

provisions that address firms’ supervisory systems, 

responsible individuals and qualification 

requirements for supervisors, supervisory system 

policies and procedures; the chief compliance 

officer and the chief compliance officer’s reporting 

authority and job security, chief compliance officer 

policies and procedures, and chief compliance 

officer reports. See Swiss Application section II.3 at 

67–109. 

Exchange Act rule 15Fi–3 requires 

SBSDs to promptly report to the 

Commission valuation disputes in 

excess of $20 million that have been 

outstanding for three or five business 

days (depending on counterparty 

types).49 However, Swiss law lacks a 

specific requirement for reporting 

security-based swap valuation disputes 

in excess of $20 million.50 Therefore, 

substituted compliance in connection 

with dispute reporting requirements is 

preliminarily determined to not be 

available. To fulfill the requirements of 

Exchange Act section 15F(i) and 

Exchange rule 15Fi–3, a Swiss Covered 

Entity would be required to comply 

with the dispute reporting requirements 

of Exchange Act rule 15Fi–3(c) directly. 

In connection with portfolio 

reconciliation requirements, the 

Commission preliminarily believes that 

Swiss requirements are comparable to 

Exchange Act requirements when part 

of one of the applicable Swiss 

requirements is not applied. The 

proposed Order includes the 

requirement that a Covered Entity be 

subject to and comply with FinMIA 

108(b). However, the proposed Order 

also requires that Covered Entities not 

apply FinMIA article 108(b)’s exception 

for ‘‘small non-financial counterparties’’ 

as defined in FinMIA article 98. 

Requiring that Covered Entities not 

apply this exception helps ensures that 

the Swiss requirements for portfolio 

reconciliation are applied to Covered 

Entities in a manner comparable to the 

applicable Exchange Act requirements. 

In connection with portfolio 

compression requirements, the 

Commission preliminarily believes that 

Swiss requirements are comparable to 

Exchange Act requirements but only 

when one of the applicable Swiss 

exclusions is not applied. The proposed 

Order includes the requirement that a 

Covered Entity be subject to and comply 

with FinMIA article 108(d).51 However, 

the proposed Order also requires that 

Covered Entities not apply the portion 

of FinMIA article 108(d) that excludes 

application of its requirements when 

there are fewer than 500 non-centrally 

cleared OTC derivatives transactions 

outstanding.52 Requiring that Covered 

Entities not apply this exclusion helps 

ensure that the Swiss requirements for 

portfolio compression are applied to 

Covered Entities in a manner 

comparable to the applicable Exchange 

Act requirements. 

In connection with trading 

relationship documentation 

requirements, the Commission 

preliminarily believes that Swiss 

requirements are not comparable to 

Exchange Act requirements. Under 

Swiss law, there is no explicit 

requirement to agree in writing to all 

terms governing the trading 

relationship.53 By comparison, 

Exchange Act rule 15Fi–5 requires that 

‘‘[t]he security-based swap trading 

relationship documentation shall be in 

writing and shall include all terms 

governing the trading relationship 

between the security-based swap dealer 

. . . and its counterparty.’’ 54 The Swiss 

Application’s statement that ‘‘[e]ven if 

OTC derivative transactions were to be 

initially traded on the basis of a purely 

verbal agreement, they would still be 

subject to the statutory requirements to 

have the key contractual terms 

confirmed and reconciled’’ 55 is 

insufficient to produce a comparable 

regulatory outcome to Exchange Act 

rule 15Fi–5, which specifically requires 

that ‘‘the security-based swap trading 

relationship documentation shall be 

executed prior to, or contemporaneously 

with, executing a security-based swap 

with any counterparty.’’ 56 Swiss law 

also does not require particularized 

disclosures regarding the status of a 

Swiss bank or its counterparty as an 

insured financial institution or financial 

company,57 as required by Exchange 

Act rule 15Fi–5(b)(5). Additionally, 

Swiss law does not require SBSDs to 

provide information regarding securitybased swaps that have been accepted for 

clearing,58 as required by Exchange Act 

rule 15Fi–5(b)(6). Given these 

discrepancies between the Swiss and 

U.S. trading relationship documentation 

requirements, the Commission 

preliminarily believes that the 

analogous Swiss requirements—taken as 

a whole—cannot be determined to 

produce comparable outcomes. 

Therefore the Commission is not 

proposing to make a positive substituted 

compliance determination for trading 

relationship documentation 

requirements. To fulfill the 

requirements of Exchange Act section 

15F(i) and Exchange rule 15Fi–5, a 

Swiss Covered Entity would be required 

to comply with the trading relationship 

documentation requirements of 

Exchange Act rule 15Fi–5 directly. 

While the Commission recognizes 

these and certain other differences 

between Swiss requirements and the 

applicable risk control requirements 

under the Exchange Act, in the 

Commission’s preliminary view those 

differences on balance would not 

preclude substituted compliance for 

internal risk management, trade 

acknowledgement and verification, 

portfolio reconciliation, and portfolio 

compression, particularly as 

requirement-by-requirement similarity 

is not needed for substituted 

compliance. 

VI. Substituted Compliance for Internal 

Supervision, Chief Compliance Officer 

and Additional Exchange Act Section 

15F(j) Requirements 

A. The Swiss Firms’ Request and 

Associated Analytic Considerations 

The Swiss Firms also request 

substituted compliance in connection 

with requirements under the Exchange 

Act relating to: 

• Internal supervision—Diligent 

supervision is required pursuant to 

Exchange Act rule 15Fh–3(h),59 and 

Exchange Act section 15F(j)(5) requires 

conflict of interest systems and 

procedures. These provisions generally 

require that SBSDs establish, maintain 

and enforce supervisory policies and 

procedures that reasonably are designed 

to prevent violations of applicable law, 

and implement certain systems and 

procedures related to conflicts of 

interest.60

• Chief compliance officers—Chief 

compliance officer requirements are set 

out in Exchange Act section 15F(k) and 


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61 17 CFR 240.15Fk–1. 

62The Swiss Application discusses Swiss 

requirements that address compliance officers and 

their responsibilities, compliance officer 

appointment, removal and compensation, related 

conflict of interest provisions and compliancerelated reports. See Swiss Application section II.3.c 

at 90–109. 

63Section 15F(j)(4)(A) particularly requires firms 

to have systems and procedures to obtain necessary 

information to perform functions required under 

section 15F. The Swiss Application in turn 

discusses Swiss provisions generally addressing 

information gathering and disclosure. See Swiss 

Application Section II.2 at 33. Section 15F(j)(6) 

prohibits firms from adopting any process or taking 

any action that results in any unreasonable restraint 

of trade, or to impose any material anticompetitive 

burden on trading or clearing. The Swiss 

Application addresses Swiss antitrust requirements. 

See Swiss Application section II.3.b at 78. 

64This portion of the proposed Order accordingly 

would extend generally to the internal supervision 

provisions of Exchange Act rule 15Fh–3(h), the 

requirement in Exchange Act section 15F(j)(4)(A) to 

have systems and procedures to obtain necessary 

information to perform functions required under 

Exchange Act section 15F and the conflict of 

interest provisions of Exchange Act section 

15F(j)(5). See para. (c)(1) of the proposed Order. 

This portion of the proposed Order does not extend 

to the portions of rule 15Fh–3(h) that mandate 

supervisory policies and procedures in connection 

with: The risk management system provisions of 

Exchange Act section 15F(j)(2) (which are 

addressed by paragraph (b)(1) of the proposed Order 

in connection with internal risk management); the 

information-related provisions of Exchange Act 

sections 15F(j)(3) and (j)(4)(B) (for which 

substituted compliance is not available); or the 

antitrust provisions of Exchange Act section 

15F(j)(6) (for which the Commission is not 

proposing to provide substituted compliance). See 

para. (c)(1)(ii) of the proposed Order. 

65See para. (c)(3) of the proposed Order. 

66See para. (c)(4) of the proposed Order. 

67As noted, substituted compliance does not 

extend to antifraud prohibitions or to certain other 

requirements under the Exchange Act ( e.g., 

segregation requirements and requirements related 

to transactions with counterparties that are not 

ECPs). See note 5, supra. 

68The Swiss Firms are not requesting substituted 

compliance in connection with: (1) Capital 

requirements: Exchange Act Rules 18a–1; (2) margin 

requirements: Exchange Act Rule 18a–3; (3) 

recordkeeping requirements not applicable to nonbank SBSEs in Exchange Act Rules 18a–5 and 18a– 

6; (4) reporting requirements applicable to non-bank 

SBSEs in Exchange Act Rule 18a–7; (5) notification 

requirements applicable to non-bank SBSEs in 

Exchange Act rule 18a–8; and (6) securities count 

requirements in Exchange Act rule 18a–9. 

69See part III, supra. 

70See note 5, supra. 

Exchange Act rule 15Fk–1.61 These 

provisions in general require that SBSDs 

designate individuals with the 

responsibility and authority to establish, 

administer and review compliance 

policies and procedures, to resolve 

conflicts of interest, and to prepare and 

certify an annual compliance report to 

the Commission.62

• Additional Exchange Act section 

15F(j) requirements—Additional 

requirements related to informationgathering pursuant to Exchange Act 

section 15F(j)(4)(A), and certain 

antitrust prohibitions specified by 

Exchange Act section 15F(j)(6).63

Taken as a whole, these internal 

supervision, chief compliance officer 

and additional Exchange Act section 

15F(j) requirements help to promote 

SBSDs’ use of structures, processes and 

responsible personnel reasonably 

designed to promote compliance with 

applicable law, to identify and cure 

instances of non-compliance and to 

manage conflicts of interest. The 

comparability assessment accordingly 

may focus on whether the analogous 

foreign requirements—taken as a 

whole—produce comparable outcomes 

with regard to providing that Covered 

Entities have structures and processes 

reasonably designed to promote 

compliance with applicable law, 

identify and cure instances of noncompliance and to manage conflicts of 

interest, in part through the designation 

of an individual with responsibility and 

authority over compliance matters. 

B. Preliminary Views and Proposed 

Order 

1. General considerations 

Based on the Swiss Application and 

the Commission’s review of applicable 

provisions, in the Commission’s 

preliminary view the relevant Swiss 

requirements would produce regulatory 

outcomes that are comparable to those 

associated with the above-described 

internal supervision, chief compliance 

officer, conflict of interest and 

information-related requirements by 

providing that Covered Entities have 

structures and processes that reasonably 

are designed to promote compliance 

with applicable law and to identify and 

cure instances of non-compliance and 

manage conflicts of interest.64 As 

elsewhere, this part of the proposed 

Order conditions substituted 

compliance on Covered Entities being 

subject to and complying with specified 

Swiss requirements that are necessary to 

establish comparability.65

The Commission recognizes that 

certain differences are present between 

those Swiss requirements and the 

applicable requirements under the 

Exchange Act. In the Commission’s 

preliminary view, on balance, however, 

those differences would not preclude 

substituted compliance within the 

relevant outcomes-oriented context. 

2. Additional Conditions 

Substituted compliance in connection 

with these requirements would be 

subject to certain additional conditions 

to help ensure the comparability of 

outcomes: 

a. Application of Swiss Supervisory and 

Compliance Requirements to Residual 

U.S. Requirements and Order 

Conditions 

Under the proposed Order, 

substituted compliance for the relevant 

internal supervision requirements 

would be conditioned on Covered 

Entities complying with applicable 

Swiss supervisory and compliance 

provisions as if those provisions also 

require the Covered Entity to comply 

with applicable requirements under the 

Exchange Act and the other applicable 

conditions to the Order.66

Even with substituted compliance, 

Covered Entities still would be subject 

directly to a number of requirements 

under the Exchange Act and to the 

conditions to the Order. In some cases, 

particular requirements under the 

Exchange Act are outside the ambit of 

substituted compliance.67 In other 

cases, certain requirements under the 

Exchange Act may not have comparable 

Swiss requirements or may be outside 

the scope of the Swiss Application,68 or 

the Covered Entity may decide not to 

use substituted compliance for certain 

requirements under the Exchange Act.69

While the Swiss regulatory framework 

in general reasonably appears to 

promote Covered Entities’ compliance 

with applicable Swiss laws, those 

requirements do not appear to promote 

Covered Entities’ compliance with 

requirements under the Exchange Act 

that are not subject to substituted 

compliance,70 or promote Covered 

Entities’ compliance with the applicable 

conditions to substituted compliance. 

This condition would address this issue, 

while still allowing Covered Entities to 

use their existing internal supervision 

and compliance frameworks to comply 

with the relevant Exchange Act 

requirements and Order conditions, 

rather than having to establish separate 

special-purpose supervision and 

compliance frameworks. 

b. Compliance Reports 

Under the proposed Order, 

substituted compliance in connection 

with the compliance report 

requirements under Exchange Act 

section 15F(k)(3) and Exchange Act rule 

15Fk–1(c) also would be subject to the 

condition that the compliance reports 

required pursuant to FINMA Circular 

2017/1 margins 78–81 must: (1) Be 

provided to the Commission at least 

annually and in the English language; 

(2) include a certification signed by the 

chief compliance officer or senior 


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71See Exchange Act rule 15Fk–1(e)(2) (defining 

‘‘senior officer’’ as ‘‘the chief executive officer or 

other equivalent officer’’). 

72See para. (c)(2) of the proposed Order. FINMA 

Circular 2017/1 margins 78–81 require that a 

Covered Entity’s 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 

Entity’s management body, also would address the 

Covered Entity’s compliance with the other 

conditions of the proposed Order (in addition to 

addressing the Covered Entity’s 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. 

74See also German Substituted Compliance 

Order, 85 FR at 85691–92; 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 15F(j)(6) antitrust 

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 240.18a–5. The Swiss Application 

discusses Swiss record making requirements. See 

Swiss Application section II.2.a. at 33–47. 

76 17 CFR 240.18a–6. The Swiss Application 

discusses Swiss record preservation requirements. 

See Swiss Application section II.2.b. at 48–61. 

77 17 CFR 240.18a–7. The Swiss Application 

discusses Swiss requirements that address firms’ 

obligations to make certain reports. See Swiss 

Application section II.2.c. at 62–64. 

78 17 CFR 240.18a–8. The Swiss Application 

discusses Swiss requirements that address firms’ 

obligations to make certain notifications. See Swiss 

Application section II.2.c. at 64–66. 

79The 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 50–52. 

officer 71 of the Covered Entity that, to 

the best of the certifier’s knowledge and 

reasonable belief and under penalty of 

law, the report is accurate and complete 

in all material respects; (3) address the 

Covered Entity’s 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 Entity’s 

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 

Entity’s annual compliance report 

referenced in Exchange Act section 

15F(k)(3) and Exchange Act rule 15Fk– 

1(c) would be required to cover.72

Although certain Swiss requirements 

address a Covered Entity’s 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

c. Antitrust Considerations 

Under the proposed Order, 

substituted compliance would not 

extend to Exchange Act section 15F(j)(6) 

(and related internal supervision 

requirements of Exchange Act rule 

15Fh–3(h)(2)(iii)(I)). Allowing an 

alternative means of compliance would 

not lead to outcomes comparable to that 

statutory prohibition.74

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 Making—Exchange Act rule 

18a–5 requires prescribed records to be 

made and kept current.75

• Record Preservation—Exchange Act 

rule 18a–6 requires preservation of 

records.76

• Reporting—Exchange Act rule 18a– 

7 requires certain reports.77

• Notification—Exchange Act rule 

18a–8 requires notification to the 

Commission when certain financial or 

operational problems occur.78

• Daily Trading Records—Exchange 

Act section 15F(g) 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 

firm’s 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 

requirements—taken as a whole— 

produce comparable outcomes with 

regard to recordkeeping, reporting, 

notification, and related practices that 

support the Commission’s oversight of 

these registrants. A foreign jurisdiction 

need not have analogues to every 

requirement under Commission rules to 

receive a positive substituted 

compliance determination. 

B. Preliminary Views and Proposed 

Order 

1. General Considerations 

Based on the Swiss Application and 

the Commission’s review of applicable 

provisions, in the Commission’s 

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 15F(g) and 

Exchange Act rules 18a–5, 18a–6, 18a– 

7, and 18a–8. 

In reaching this preliminary 

conclusion, the Commission recognizes 

that there are certain differences 

between Swiss requirements and the 

Exchange Act requirements. In the 

Commission’s 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 

18a–5, 18a–6, 18a–7, and 18a–8 

(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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80See French Substituted Compliance Order, 86 

FR at 41649; UK Substituted Compliance Order, 86 

FR at 43360. 

81See, e.g., Exchange Act Release No. 71958 (Apr. 

17, 2014), 79 FR 25194, 25199–200 (May 2, 2014). 

82See French Substituted Compliance Order, 86 

FR at 41650; UK Substituted Compliance Order, 86 

FR at 43361. 

83See French Substituted Compliance Order, 86 

FR at 41650; UK Substituted Compliance Order, 86 

FR at 43361. 

84See paras. (a)(1) through (18) of Exchange Act 

rule 18a–5. 

85See paras. (b)(1) through (14) of Exchange Act 

rule 18a–6. 

86See para. (d)(1) of the proposed Order. 

within a given recordkeeping, reporting, 

or notification rule (rather than apply 

substituted compliance) because it can 

utilize systems that its affiliated brokerdealer has implemented to comply with 

them. This proposed approach is 

consistent with the approach taken by 

the Commission in the French and UK 

Substituted Compliance Orders.80

As applied to Exchange Act rules 

18a–5 and 18a–6, this approach of 

providing greater flexibility results in 

preliminary substituted compliance 

determinations with respect to the 

different categories of records these 

rules require SBS Entities with a 

prudential regulator to make, keep 

current, and/or preserve. The objective 

of these rules—taken as a whole—is to 

assist the Commission in monitoring 

and examining for compliance with 

substantive Exchange Act requirements 

applicable to SBS Entities with a 

prudential regulator (e.g., business 

conduct requirements) as well as to 

promote the prudent operation of these 

firms.81 The Commission preliminarily 

believes the comparable Swiss 

recordkeeping rules achieve these 

outcomes with respect to compliance 

with substantive Swiss requirements for 

which preliminary positive substituted 

compliance determinations are being 

made in this proposed Order (e.g., the 

preliminary positive substituted 

compliance determinations with respect 

to the majority of the Exchange Act 

business conduct requirements). At the 

same time, the recordkeeping rules 

address different categories of records 

through distinct requirements within 

the rules. Each requirement with respect 

to a specific category of records (e.g., 

paragraph (b)(1) of Exchange Act rule 

18a–5 addressing trade blotters) can be 

viewed in isolation as a distinct 

recordkeeping rule. Therefore, it may be 

appropriate to make substituted 

compliance determinations at this level 

of Exchange Act rules 18a–5 and 18a– 

6. 

As discussed in more detail below, 

the Commission’s preliminary view is 

that substituted compliance is 

appropriate for most of the requirements 

applicable to SBS Entities with a 

prudential regulator within the 

recordkeeping, reporting, and 

notification rules. However, certain of 

the discrete requirements in these rules 

are fully or partially linked to 

substantive Exchange Act requirements 

for which substituted compliance is not 

available or for which a positive 

substituted compliance determination 

would not be made under the proposed 

Order. In these cases, a preliminary 

positive substituted compliance 

determination is not be made for the 

requirement that is fully linked to the 

substantive requirement or to the part of 

the requirement that is linked to the 

substantive requirement. In particular, a 

preliminary positive substituted 

compliance determination is not being 

made, in full or in part, for 

recordkeeping, reporting, or notification 

requirements linked to the following 

Exchange Act rules for which 

substituted compliance is not available 

or a preliminary positive substituted 

compliance determination is not being 

made: (1) Exchange Act rule 15Fh–4 

(‘‘Rule15Fh–4 Exclusion’’); (2) Exchange 

Act rule 15Fh–5 (‘‘Rule 15Fh–5 

Exclusion’’); (3) Exchange Act rule 

15Fh–6 (‘‘Rule 15Fh–6 Exclusion’’); (4) 

Exchange Act rule 18a–4 (‘‘Rule 18a–4 

Exclusion’’); (5) Regulation SBSR 

(‘‘Regulation SBSR Exclusion’’); (6) 

Form SBSE and its variations (‘‘Form 

SBSE Exclusion’’); (7) Exchange Act rule 

15Fh–1 Exclusion (‘‘Rule 15Fh–1 

Exclusion’’), (8) Exchange Act rule 

15Fh–2 (‘‘Rule 15Fh–2 Exclusion’’); and 

(9) Exchange Act rule 15Fi–5 (‘‘Rule 

15Fi–5 Exclusion’’). This proposed 

approach is consistent with the 

approach taken by the Commission in 

the French and UK Substituted 

Compliance Orders.82

In addition, certain of the 

requirements in the recordkeeping, 

reporting, and notification rules are 

expressly linked to substantive 

Exchange Act requirements where a 

preliminary positive substituted 

compliance determination is being 

made under the proposed Order. In 

these cases, substituted compliance 

with the linked requirement in the 

recordkeeping, reporting, or notification 

rule is conditioned on the Covered 

Entity applying substituted compliance 

to the linked substantive Exchange Act 

requirement. This is the case regardless 

of whether the requirement is fully or 

partially linked to the substantive 

Exchange Act requirement. The 

recordkeeping, reporting, and 

notification requirements that are linked 

to a substantive Exchange Act 

requirement are designed and tailored to 

assist the Commission in monitoring 

and examining an SBS Entity’s 

compliance with the substantive 

Exchange Act requirement. Swiss 

recordkeeping, reporting, and 

notification requirements are designed 

to perform a similar role with respect to 

the substantive Swiss requirements to 

which they are linked. Consequently, 

this condition is designed to ensure that 

the records, reports, and notifications of 

a Covered Entity align with the 

substantive Exchange Act or Swiss 

requirement to which they are linked. 

For these reasons, under the proposed 

Order, substituted compliance for 

recordkeeping, reporting, and 

notification requirements linked to the 

following Exchange Act rules would be 

conditioned on the Covered Entity 

applying substituted compliance to the 

linked substantive Exchange Act rule: 

(1) Exchange Act rule 15Fh–3(h) (‘‘Rule 

15Fh–3 Condition’’); (2) Exchange Act 

rule 15Fi–2 (‘‘Rule 15Fi–2 Condition’’); 

(3) Exchange Act rule 15Fi–3 (‘‘Rule 

15Fi–3 Condition’’); (4) Exchange Act 

rule 15Fi–4 (‘‘Rule 15Fi–4 Condition’’); 

and (5) Exchange Act rule 15Fk–1 

(‘‘Rule 15Fk–1 Condition’’). This 

proposed approach is consistent with 

the approach taken by the Commission 

in the French and UK Substituted 

Compliance Orders.83

2. Exchange Act Rule 18a–5 

Exchange Act rule 18a–5 requires SBS 

Entities to make and keep current 

various types of records. The 

requirements for SBS Entities without a 

prudential regulator are set forth in 

paragraph (a) of the rule.84 The 

requirements for SBS Entities with a 

prudential regulator are set forth in 

paragraph (b) of the rule.85 The 

Commission is making a preliminary 

positive substituted compliance 

determination for many of the 

requirements of paragraph (b) of 

Exchange Act rule 18a–5 in the granular 

manner discussed above.86

However, certain of the requirements 

in these paragraphs are linked to 

substantive Exchange Act requirements 

for which substituted compliance is not 

available or a preliminary positive 

substituted compliance determination 

would not be made under the proposed 

Order. In these cases, a positive 

substituted compliance determination 

would not be made for the linked 

requirement in Exchange Act rule 18a– 

5 or the portion of the requirement in 

Exchange Act rule 18a–5 that is linked 


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87A positive preliminary substituted compliance 

determination would not be made for the following 

requirements of Exchange Act rule 18a–5 because 

they are linked to a substantive Exchange Act 

requirement for which the proposed Order would 

not provide substituted compliance: (1) Exchange 

Act rules 18a–5(b)(9) and (10) are fully linked to 

Exchange Act rule 18a–4 and, therefore, would be 

subject to the Rule 18a–4 Exclusion; (2) Exchange 

Act rule 18a–5(b)(12) is fully linked to Exchange 

Act rule 15Fh-6 and, therefore, would be subject to 

the Rule 15Fh–6 Exclusion; (3) the portions of 

Exchange Act rule 18a–5(b)(13) that relates to 

Exchange Act rule 15Fh–4 would be subject to the 

Rule 15Fh–4 Exclusion; (4) the portion of Exchange 

Act rule 18a–5(b)(13) that relates to Exchange Act 

rule 15Fh–5 would be subject to the 15Fh–5 

Exclusion; (5) the portion of Exchange Act rule 18a– 

5(b)(13) that relates to Exchange Act rule 15Fh–1 

would be subject to the 15Fh–1 Exclusion; and (6) 

the portion of Exchange Act rule 18a––5(b)(13) that 

relates to Exchange Act rule 15Fh–2 would be 

subject to the 15Fh–2 Exclusion. 

88Substituted compliance with the following 

requirements of Exchange Act rule 18a–5 would be 

conditioned on the Covered Entity applying 

substituted compliance to the linked substantive 

Exchange Act requirement: (1) Exchange Act rules 

18a-5(b)(6) and (b)(11) are linked to Exchange Act 

rule 15Fi–2 and, therefore, would be subject to the 

Rule 15Fi–2 Condition; (2) Exchange Act rule 18a– 

5(b)(13) is linked to Exchange Act rule 15Fh–3 and, 

therefore, would be subject to the Rule 15Fh–3(h) 

Condition; (3) Exchange Act rule 18a–5(b)(13) is 

linked to Exchange Act rule 15Fk-1, and therefore, 

would be subject to the Rule 15Fk–1 Condition; (4) 

Exchange Act rules 18a–5(b)(14)(i) and (ii) are 

linked to Exchange Act rule 15Fi–3 and, therefore, 

would be subject to the Rule 15Fi–3 Condition; and 

(5) Exchange Act rule 18a–5(b)(14)(iii) is linked to 

Exchange Act rule 15Fi–4 and, therefore, would be 

subject to the Rule 15Fi–4 Condition. 

89See para. (d)(1)(ii)(B) of the proposed Order. 

90See para. (d)(1)(ii)(A) of the proposed Order. 

91The chart below does not include the proposed 

conditions for applying substituted compliance to 

Exchange Act rule 18a–5; 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. (d)(7) of 

the proposed Order (setting forth the English 

translation requirement). 

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 

Commission’s recordkeeping 

requirements that are linked with the 

counterparty protection requirements in 

Exchange Act rule 15Fh–3(h).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 

Commission’s 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– 

5(b)(1), (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 18a–5. 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 require—on a very 

limited basis—the production of a 

record that consolidates the information 

required by Exchange Act rules 18a– 

5(b)(1), (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 

Commission’s preliminary positive 

substituted compliance determinations 

with respect to requirements of 

Exchange Act rule 

18a–5 by listing in each row: (1) The 

paragraph of the proposed Order that 

sets forth the preliminary 

determination; (2) the paragraph(s) of 

Exchange Act rule 18a–5 to which the 

preliminary determination applies; (3) a 

brief description of the records required 

by the paragraph(s); 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 18a–5 

[Record making] 

Order 

paragraph 

Rule 

paragraph Rule description Additional conditions and partial exclusions 

(d)(1)(i)(A) .................... (b)(1) ........................... Trade blotters .................................................. SEC Format Condition. 

(d)(1)(i)(B) .................... (b)(2) ........................... Account ledgers .............................................. SEC Format Condition. 

(d)(1)(i)(C) .................... (b)(3) ........................... Stock record .................................................... SEC Format Condition. 

(d)(1)(i)(D) .................... (b)(4) ........................... Memoranda of brokerage orders .................... N/A. 

(d)(1)(i)(E) .................... (b)(5) ........................... Memoranda of proprietary orders ................... N/A. 

(d)(1)(i)(F) .................... (b)(6) ...........................

(b)(11) .........................

Confirmations, trade verification ..................... Rule 15Fi–2 Condition. 

(d)(1)(i)(G) ................... (b)(7) ........................... Accountholder information .............................. SEC Format Condition. 

(d)(1)(i)(H) .................... (b)(8) ........................... Associated person’s employment application N/A. 

(d)(1)(i)(I) ..................... (b)(13) ......................... Compliance with business conduct requirements.(1) Rule 15Fh–3(h) Condition. 

(2) Rule 15Fk–1 Condition. 

(3) Rule 15Fh–1 Exclusion. 

(4) Rule 15Fh–2 Exclusion. 

(5) Rule 15Fh–4 Exclusion. 

(6) Rule 15Fh–5 Exclusion. 

(d)(1)(i)(J) .................... (b)(14)(i) .....................

(b)(14)(ii) .....................

Portfolio reconciliation ..................................... Rule 15Fi–3 Condition. 


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92See 17 CFR 240.18a–6. 

93Paras. (a)(1), (b)(1), (d)(2)(i), and (d)(3)(i) of 

Exchange Act rule 18a–6 apply to SBS Entities 

without a prudential regulator. Paras. (a)(2), (b)(2), 

(d)(2)(ii), and (d)(3)(ii) of Exchange Act rule 

18a–6 apply to SBS Entities with a prudential 

regulator. Paras. (c), (d)(1), (d)(4), and (d)(5) of 

Exchange Act rule 18a–6 apply to SBS Entities 

irrespective of whether they have a prudential 

regulator. 

94A positive substituted compliance 

determination would not be made for the following 

requirements of Exchange Act rule 18a–6 because 

they are linked to a substantive Exchange Act 

requirement for which the proposed Order would 

not provide substituted compliance: (1) Exchange 

Act rule 18a–6(b)(2)(vi) is fully linked to Regulation 

SBSR and, therefore, would be subject to the 

Regulation SBSR Exclusion; (2) Exchange Act rule 

18a–6(b)(2)(viii) is fully linked to Exchange Act rule 

15Fh–4 and, therefore, would be subject to the Rule 

15Fh–4 Exclusion; (3) Exchange Act rule 18a– 

6(b)(2)(viii) is fully linked to Exchange Act rule 

15Fh–5 and, therefore, would be subject to the Rule 

15Fh–5 Exclusion; (4) Exchange Act rule 18a– 

6(b)(2)(v) is fully linked to Exchange Act rule 18a– 

4 and, therefore, would be subject to the Rule 18a– 

4 Exclusion; (5) the portion of Exchange Act rule 

18a–6(c) relating to Form SBSE and its variations 

would be subject to the Form SBSE Exclusion; (6) 

the portion of Exchange Act rule 18a–6(b)(2)(vii) 

that relates to Exchange Act rule 15Fh–1 would be 

subject to the 15Fh–1 Exclusion; (7) the portion of 

Exchange Act rule 18a–6(b)(2)(vii) that relates to 

Exchange Act rule 15Fh–2 would be subject to the 

15Fh–2 Exclusion; (8) the portion of Exchange Act 

rule 18a–6(b)(2)(vii) that relates to Exchange Act 

rule 15Fh–4 would be subject to the 15Fh–4 

Exclusion; (9) the portion of Exchange Act rule 18a– 

6(b)(2)(vii) that relates to Exchange Act rule 15Fh– 

5 would be subject to the 15Fh–5 Exclusion; (10) 

the portion of Exchange Act rule 18a–6(b)(2)(vii) 

that relates to Exchange Act rule 15Fh–6 would be 

subject to the 15Fh–6 Exclusion; and (11) the 

portion of Exchange Act rules 18a–6(d)(4) and (d)(5) 

that relates to Exchange Act rule 15Fi–5 would be 

subject to the Rule 15Fi–5 Exclusion. 

95Substituted compliance with the following 

requirements of Exchange Act rule 18a–6 would be 

conditioned on the Covered Entity applying 

substituted compliance to the linked substantive 

Exchange Act requirement: (1) Exchange Act rule 

18a–6(b)(2)(vii) is linked to Exchange Act rule 

15Fh–3 and, therefore, would be subject to the Rule 

15Fh–3(h) Condition; (2) Exchange Act rule 18a– 

6(b)(2)(vii) is linked to Exchange Act rule 15Fk–1 

and, therefore, would be subject to the Rule 15Fk– 

1 Condition; (3) Exchange Act rules 18a–6(d)(4) and 

(d)(5) are linked to Exchange Act rule 15Fi–3 and, 

therefore, would be subject to the Rule 15Fi–3 

Condition; and (4) Exchange Act rules 18a–6(d)(4) 

and (d)(5) are linked to Exchange Act rule 15Fi–4 

and, therefore, would be subject to the Rule 15Fi– 

4 Condition. 

EXCHANGE ACT RULE 18a–5—Continued 

[Record making] 

Order 

paragraph 

Rule 

paragraph Rule description Additional conditions and partial exclusions 

(d)(1)(i)(K) .................... (b)(14)(iii) .................... Portfolio compression ..................................... Rule 15Fi–4 Condition. 

The following table summarizes the 

Commission’s preliminary 

determinations with respect to 

requirements of Exchange Act rule 

18a–5 for which a positive substituted 

compliance determination would not be 

made because they are fully linked to 

substantive Exchange Act requirements 

for which the proposed Order would not 

provide substituted compliance by 

listing in each row: (1) The paragraph of 

the proposed Order that sets forth the 

determination; (2) the paragraph of 

Exchange Act rule 18a–5 to which the 

determination applies; (3) a brief 

description of the records required by 

the paragraph; and (4) a brief 

description of why the requirement is 

excluded from substituted compliance. 

EXCHANGE ACT RULE 18a–5 

[Record making] 

Order paragraph Rule paragraph Rule description Exclusion 

(d)(1)(ii)(C) ................... (b)(9) ........................... Possession or control records ........................ Rule 18a–4 Exclusion. 

(d)(1)(ii)(C) ................... (b)(10) ......................... Reserve computations .................................... Rule 18a–4 Exclusion. 

(d)(1)(ii)(C) ................... (b)(12) ......................... Political contribution records ........................... Rule 15Fh–6 Exclusion. 

3. Exchange Act Rule 18a–6 

Exchange Act rule 18a–6 requires an 

SBS Entity to preserve certain types of 

records if it makes or receives them (in 

addition to the records the SBS Entity 

is required to make and keep current 

pursuant to Exchange Act rule 18a–5).92

Exchange Act rule 18a–6 also prescribes 

the time period that these additional 

records and the records required to be 

made and kept current pursuant to 

Exchange Act rule 18a–5 must be 

preserved and the manner in which they 

must be preserved. 

Paragraphs (a) through (d) of 

Exchange Act rule 18a–6 identify the 

records that an SBS Entity must retain 

if it makes or receives them and 

prescribes the retention periods for 

these records as well as for the records 

that must be made and kept current 

pursuant to Exchange Act rule 18a–5. 

Certain of these paragraphs prescribe 

requirements separately for SBS Entities 

without a prudential regulator and SBS 

Entities with a prudential regulator.93

The proposed Order would make 

substituted compliance available for the 

requirements of these paragraphs 

applicable to SBS Entities with a 

prudential regulator. As discussed 

below, the Commission is making a 

preliminary positive substituted 

compliance determination for many of 

the requirements of these paragraphs 

applicable to SBS Entities with a 

prudential regulator. 

However, certain of these 

requirements are fully or partially 

linked to substantive Exchange Act 

requirements for which a preliminary 

positive substituted compliance 

determination would not be made under 

the proposed Order. In these cases, a 

positive substituted compliance 

determination would not be made for 

the linked requirement in Exchange Act 

rule 18a–6.94

In addition, certain of the 

requirements in Exchange Act rule 18a– 

6 are fully or partially linked to 

substantive Exchange Act requirements 

where a positive substituted compliance 

determination would be made under the 

proposed Order. In these cases, 

substituted compliance with the 

requirement in Exchange Act rule 18a– 

6 would be conditioned on the Covered 

Entity applying substituted compliance 

to the linked substantive Exchange Act 

requirement.95

Paragraph (e) of Exchange Act rule 

18a–6 sets forth the requirements for 

preserving records electronically. 

Paragraph (f) sets forth requirements for 

when records are prepared or 

maintained by a third party. The Order 

would make substituted compliance 

available for the requirements of 

paragraphs (e) and (f) of Exchange Act 


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96See paras. (d)(2)(i)(L) and (M) of the proposed 

Order. 

97The chart below does not include the proposed 

conditions for applying substituted compliance to 

Exchange Act rule 18a–6; namely that the Covered 

Entity: (1) must be subject to and complies with the 

requirements of foreign law; and (2) must promptly 

furnish to a representative of the Commission upon 

request an English translation of a record. See para. 

(d)(7) of the proposed Order (setting forth the 

English translation requirement). 

rule 18a–6 with respect to Covered 

Entities with a prudential regulator.96

Paragraph (g) of Exchange Act rule 

18a–6 requires an SBS Entity to furnish 

promptly to a representative of the 

Commission legible, true, complete, and 

current copies of those records of the 

SBS Entity that are required to be 

preserved under Exchange Act rule 18a– 

6, or any other records of the SBS Entity 

that are subject to examination or 

required to be made or maintained 

pursuant to section 15F of the Exchange 

Act that are requested by a 

representative of the Commission. The 

proposed Order would not make 

substituted compliance available for the 

requirements of paragraph (g) of 

Exchange Act rule 18a–6 because there 

is no comparable requirement in 

Switzerland to produce these records to 

a representative of the Commission. 

The following table summarizes the 

Commission’s preliminary positive 

substituted compliance determinations 

with respect to requirements of 

Exchange Act rule 18a-6 by listing in 

each row: (1) The paragraph of the 

proposed Order that sets forth the 

determination; (2) the paragraph(s) of 

Exchange Act rule 18a–6 to which the 

determination applies; (3) a brief 

description of the records required by 

the paragraph(s); 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.97

EXCHANGE ACT RULE 18a–6 

[Record preservation] 

Order paragraph Rule paragraph Rule description Conditions and partial exclusions 

(d)(2)(i)(A) .................... (a)(2) ........................... 6 year record preservation .............................. N/A. 

(d)(2)(i)(B) .................... (b)(2)(i) ....................... 3 year record preservation .............................. N/A. 

(d)(2)(i)(C) .................... (b)(2)(ii) ....................... Communications ............................................. N/A. 

(d)(2)(i)(D) .................... (b)(2)(iii) ...................... Account documents ........................................ N/A. 

(d)(2)(i)(E) .................... (b)(2)(iv) ...................... Written agreements ......................................... N/A.

(d)(2)(i)(F) .................... (b)(2)(vii) ..................... Business conduct standard records ............... (1) Rule 15Fh–3(h) Condition. 

(2) Rule 15Fk–1 Condition. 

(3) Rule 15Fh–1 Exclusion. 

(4) Rule 15Fh–2 Exclusion. 

(5) Rule 15Fh–4 Exclusion. 

(6) Rule 15Fh–5 Exclusion. 

(7) Rule 15Fh–6 Exclusion. 

(d)(2)(i)(G) ................... (c) ............................... Corporate documents ..................................... Form SBSE Exclusion. 

(d)(2)(i)(H) .................... (d)(1) ........................... Associated person’s employment application N/A. 

(d)(2)(i)(I) ..................... (d)(2)(ii) ....................... Regulatory authority reports ........................... N/A. 

(d)(2)(i)(J) .................... (d)(3)(ii) ....................... Compliance, supervisory, and procedures 

manuals.

N/A. 

(d)(2)(i)(K) .................... (d)(4) ...........................

(d)(5) ...........................

Portfolio reconciliation ..................................... (1) Rule 15Fi–3 Condition. 

(2) Rule 15Fi–4 Condition. 

(3) Rule 15Fi–5 Exclusion. 

(d)(2)(i)(L) .................... (e) ............................... Electronic storage system ............................... N/A. 

(d)(2)(i)(M) ................... (f) ................................ Third-party recordkeeper ................................ N/A. 

The following table summarizes the 

Commission’s preliminary 

determinations with respect to 

requirements of Exchange Act rule 18a– 

6 for which a positive substituted 

compliance determination would not be 

made because they are fully linked to 

substantive Exchange Act requirements 

for which the proposed Order would not 

provide substituted compliance by 

listing in each row: (1) The paragraph of 

the proposed Order that sets forth the 

determination; (2) the paragraph of 

Exchange Act rule 18a–6 to which the 

determination applies; (3) a brief 

description of the records required by 

those paragraph; and (4) a brief 

description of why the requirement is 

excluded from substituted compliance. 

EXCHANGE ACT RULE 18a–6 

[Preservation] 

Order paragraph Rule paragraph Rule description Exclusion 

(d)(2)(ii) ........................ (b)(2)(v) ...................... Information supporting financial reports ......... Rule 18a–4 Exclusion. 

(d)(2)(ii) ........................ (b)(2)(vi) ...................... Regulation SBSR information ......................... Regulation SBSR Exclusion. 

(d)(2)(ii) ........................ (b)(2)(viii) .................... Special entity documents ................................ (1) Rule 15Fh–4 Exclusion. 

(2) Rule 15Fh–5 Exclusion. 

4. Exchange Act Rule 18a–7 

Exchange Act rule 18a–7 requires SBS 

Entities, on a monthly basis (if not 

prudentially regulated) or on a quarterly 

basis (if prudentially regulated), to file 

an unaudited financial and operational 

report on the FOCUS Report Part II (if 

not prudentially regulated) or Part IIC (if 

prudentially regulated). The 


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98See Order Designating Financial Industry 

Regulatory Authority, Inc., to Receive Form X–17A– 

5 (FOCUS Report) from Certain Security-Based 

Swap Dealers and Major Security-Based Swap 

Participants, Exchange Release No. 88866 (May 14, 

2020). 

99Under the proposed Order, Covered Entities 

with a prudential regulator would need to present 

the information reported in the FOCUS Report in 

accordance with GAAP that the firm uses to prepare 

publicly available or available to be issued general 

purpose financial statements in its home 

jurisdiction instead of U.S. GAAP if other GAAP, 

such as International Financial Reporting Standards 

(IFRS) as issued by the International Accounting 

Standards Board (IASB), is used by the Covered 

Entity in preparing publicly available or available 

to be issued general purpose financial statements in 

Switzerland. 

100The Manner and Format condition is included 

in the French and UK Substituted Compliance 

Orders. See French Substituted Compliance Order, 

86 FR at 41651; UK Substituted Compliance Order, 

86 FR at 43361–62. 

101The chart below does not include the 

proposed conditions for applying substituted 

compliance to Exchange Act rule 18a–7; namely 

that the Covered Entity: (1) Must be subject to and 

comply with specified requirements of foreign law; 

and (2) must promptly furnish to a representative 

of the Commission upon request an English 

translation of a report. See para. (d)(7) of the 

proposed Order (setting forth the English 

translation requirement). 

102See 17 CFR 240.18a–8. 

Commission will use the FOCUS 

Reports filed by the SBS Entities to both 

monitor the financial and operational 

condition of individual SBS Entities and 

to perform comparisons across SBS 

Entities. The FOCUS Report Part IIC 

elicits less information than the FOCUS 

Report Part II because the Commission 

does not have responsibility for 

overseeing the capital and margin 

requirements applicable to these 

entities. 

The FOCUS Report Parts II and IIC are 

standardized forms that elicit specific 

information through numbered line 

items. This facilitates cross-firm 

analysis and comprehensive monitoring 

of all SBS Entities registered with the 

Commission. Further, the Commission 

has designated the Financial Industry 

Regulatory Authority, Inc. (‘‘FINRA’’) to 

receive the FOCUS Reports from SBS 

Entities.98 Broker-dealers registered 

with the Commission currently file their 

FOCUS Reports with FINRA through the 

eFOCUS system it administers. Using 

FINRA’s eFOCUS system will enable 

broker-dealers, security-based swap 

dealers, and major security-based swap 

participants to file FOCUS Reports on 

the same platform using the same 

preexisting templates, software, and 

procedures. 

Paragraph (a)(2) of Exchange Act rule 

18a–7 requires SBS Entities with a 

prudential regulator to file the FOCUS 

Report Part IIC on a quarterly basis. The 

proposed Order would provide 

substituted compliance for this 

requirement subject to the condition 

that the Covered Entity file with the 

Commission periodic unaudited 

financial and operational information in 

the manner and format specified by the 

Commission by order or rule (‘‘Manner 

and Format Condition’’) and present the 

financial information in accordance 

with generally accepted accounting 

principles (‘‘GAAP’’) that the firms use 

to prepare general purpose publicly 

available or available to be issued 

financial statements in Switzerland 

(‘‘Swiss GAAP Condition’’).99 The 

Commission believes that it would be 

appropriate to condition substituted 

compliance with respect to Exchange 

Act rule 18a–7 on the Covered Entity 

filing unaudited financial and 

operational information in a manner 

and format that facilitates cross-firm 

analysis and comprehensive monitoring 

of all SBS Entities registered with the 

Commission.100 For example, the 

Commission could by order or rule 

require Covered Entities with a 

prudential regulator to file the financial 

and operational information with 

FINRA using the FOCUS Report Part IIC 

but permit the information input into 

the form to be the same information the 

SBS Entity reports to FINMA. 

The following table summarizes the 

Commission’s proposed preliminary 

positive substituted compliance 

determinations with respect to 

requirements of Exchange Act rule 18a– 

7 by listing in each row: (1) The 

paragraph of the proposed Order that 

sets forth the determination; (2) the 

paragraph of Exchange Act rule 18a–7 to 

which the determination applies; (3) a 

brief description of the report required 

by the paragraph; and (4) a brief 

description of any additional conditions 

to applying substituted compliance to 

the requirements.101

EXCHANGE ACT RULE 18A–7 

[Reporting] 

Order paragraph Rule paragraph Rule description Conditions 

(d)(3)(i) ......................... (a)(2) ........................... File FOCUS Reports ....................................... (1) Manner and Format Condition. 

(2) Swiss GAAP Condition. 

5. Exchange Act Rule 18a–8 

Exchange Act rule 18a–8 requires SBS 

Entities to send notifications to the 

Commission if certain adverse events 

occur.102 The proposed Order would 

provide substituted compliance for the 

requirements of Exchange Act rule 18a– 

8 applicable to SBS Entities with a 

prudential regulator (subject to 

conditions and limitations). In 

particular, the requirements of: (1) 

Paragraph (c) of Exchange Act Rule 18a– 

8 that an SBS Entity that is a securitybased swap dealer and that files a notice 

of adjustment to its reported capital 

category with a U.S. prudential 

regulator must transmit a copy of the 

notice to the Commission; (2) paragraph 

(d) of the rule that an SBS Entity 

provide notification to the Commission 

if it fails to make and keep current 

books and records under Exchange Act 

rule 18a–5 and to transmit a subsequent 

report on steps being taken to correct 

the situation; and (3) paragraph (h) of 

the rule setting forth how to make the 

notifications required by Exchange Act 

18a–8. 

Under the proposed Order, 

substituted compliance in connection 

with the notification requirements of 

Exchange Act rule 18a–8 would be 

subject to the condition that the Covered 

Entity: (1) Simultaneously sends a copy 

of any notice required to be sent by 

Swiss notification laws to the 

Commission in the manner specified on 

the Commission’s website (i.e., the ‘‘SEC 

Filing Condition’’); and (2) includes 

with the transmission the contact 

information of an individual who can 

provide further information about the 

matter that is the subject of the notice 

(i.e., the ‘‘Contact Information 

Condition’’). The purpose of this 

condition is to alert the Commission to 

financial or operational problems that 

could adversely affect the firm—the 

objective of Exchange Act rule 18a–8. 

In addition, the Order does not 

provide substituted compliance for 

paragraph (g) of Exchange Act rule 18a– 

8 that an SBS Entity that is a securitybased swap dealer provide notification 

if it fails to make a required deposit into 

its special reserve account for the 


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103The chart below does not include the 

proposed conditions for applying substituted 

compliance to Exchange Act rule 18a–8; namely 

that the Covered Entity: (1) Must be subject to and 

comply with specified requirements of foreign law; 

and (2) must promptly furnish to a representative 

of the Commission upon request an English 

translation of a notification. See para. (d)(7) of the 

proposed Order (setting forth the English 

translation requirement). 

104See 15 U.S.C. 78o–10(g). 

105See CO article 958f; FMIO article 36; FMIO– 

FINMA article 1; FinMIA articles 38, 104, and 106; 

FINMA Circular 2013/8 marg. 60 and marg. 61. 

106See para. (d)(5) of the proposed Order. 

107See Exchange Act section 15F(f); Exchange Act 

rule 18a–6(g). French and UK Substituted 

Compliance Orders do not extend substituted 

compliance to these requirements. See French 

Substituted Compliance Order, 86 FR at 41650; UK 

Substituted Compliance Order, 86 FR at 43361. 

exclusive benefit of security-based swap 

customers under Exchange Act rule 

18a–4. Substituted compliance is not 

available for Exchange Act rule 18a–4. 

In addition, the proposed Order 

would not provide substituted 

compliance for paragraph (g) of 

Exchange Act rule 18a–8 that an SBS 

Entity that is a security-based swap 

dealer provide notification if it fails to 

make a required deposit into its special 

reserve account for the exclusive benefit 

of security-based swap customers under 

Exchange Act rule 18a–4. Substituted 

compliance is not available for 

Exchange Act rule 18a–4. 

The following table summarizes the 

Commission’s proposed preliminary 

positive substituted compliance 

determinations with respect to 

requirements of Exchange Act rule 18a– 

8 by listing in each row: (1) The 

paragraph of the proposed Order that 

sets forth the determination; (2) the 

paragraph of Exchange Act rule 18a–8 to 

which the determination applies; (3) a 

brief description of the notification 

required by the paragraph; and (4) a 

brief description of any additional 

conditions to applying substituted 

compliance to the requirements.103

EXCHANGE ACT RULE 18a–8 

[Notification] 

Order paragraph Rule paragraph Rule description Conditions 

(d)(4)(i)(B) .................... (c) ............................... Prudential regulator capital category adjustment notices.(1) SEC Filing Condition. 

(2) Contact Information Condition. 

(d)(4)(i)(C) .................... (d) ............................... Books and records notices ............................. (1) SEC Filing Condition. 

(2) Contact Information Condition. 

The following table summarizes the 

Commission’s preliminary 

determinations with respect to 

requirements of Exchange Act rule 18a– 

8 for which a positive substituted 

compliance determination would not be 

made because they are fully linked to 

substantive Exchange Act requirements 

for which the proposed Order would not 

provide substituted compliance by 

listing in each row: (1) The paragraph of 

the proposed Order that sets forth the 

determination; (2) the paragraph of 

Exchange Act rule 18a–8 to which the 

determination applies; (3) a brief 

description of the notification required 

by the paragraph; and (4) the exclusion 

from substituted compliance. 

EXCHANGE ACT RULE 18A–8 

[Notification] 

Order paragraph Rule paragraph Rule description Exclusion 

(d)(4)(ii)(C) ................... (g) ............................... Reserve account notices ................................ Rule 18a–4 Exclusion. 

6. Exchange Act Section 15F(g) 

Exchange Act Section 15F(g) requires 

SBS Entities, including SBS Entities 

with a prudential regulator, to maintain 

daily trading records.104 The 

Commission preliminarily believes 

Swiss laws produce a comparable result 

in terms of its daily trading 

recordkeeping requirements.105

Accordingly, the Commission 

preliminarily is making a positive 

substituted compliance determination 

for the self-executing requirements in 

this paragraph.106

7. Examination and Production of 

Records 

The proposed Order would not extend 

to, and Covered Entities would remain 

subject to, the requirement of Exchange 

Act section 15F(f) to keep books and 

records open to inspection by any 

representative of the Commission and 

the requirement of Exchange Act rule 

18a–6(g) to furnish promptly to a 

representative of the Commission 

legible, true, complete, and current 

copies of those records of the Covered 

Entity that are required to be preserved 

under Exchange Act rule 18a–6, or any 

other records of the Covered Entity that 

are subject to examination or required to 

be made or maintained pursuant to 

Exchange Act section 15F that are 

requested by a representative of the 

Commission.107

Consequently, every Covered Entity 

registered with the Commission, 

whether complying directly with 

Exchange Act requirements or relying 

on substituted compliance as a means of 

complying with the Exchange Act, 

would be required to satisfy the 

inspection and production requirements 

imposed on such entities under the 

Exchange Act. Covered Entities would 

be able to make, keep, and preserve 

records, subject to the proposed 

conditions described above, in a manner 

prescribed by applicable Swiss 

requirements. As an element of its 

substituted compliance application, the 

Swiss Firms have provided the 

Commission with adequate assurances 

that no law or policy would impede the 

ability of any entity that is directly 

supervised by the authority and that 

may register with the Commission to 

provide prompt access to the 

Commission to such entity’s books and 

records or to submit to onsite inspection 

or examination by the Commission. 

Consistent with those assurances and 

the requirements that apply to all 

Covered Entities under the Exchange 

Act, Covered Entities operating under 

the proposed Order would need to keep 

books and records open to inspection by 

any representative of the Commission 

and to furnish promptly to a 


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108See para. (d)(7) of the proposed Order. 

109See French Substituted Compliance Order, 86 

FR at 41651; UK Substituted Compliance Order, 86 

FR at 43361. 

110See generally Business Conduct Adopting 

Release, 81 FR at 30079. 

111Staff also spoke with FINMA supervisors and 

reviewed information on FINMA’s website. 

representative of the Commission 

legible, true, complete, and current 

copies of those records of the firm that 

these entities are required to preserve 

under Exchange Act rule 18a–6 (which 

would include records for which a 

positive substituted compliance 

determination is being made with 

respect to Exchange Act rule 18a–6 

under the Order), or any other records 

of the firm that are subject to 

examination or required to be made or 

maintained pursuant to Exchange Act 

section 15F that are requested by a 

representative of the Commission. 

8. English Translations 

The proposed Order provides that to 

the extent documents are not prepared 

in the English language, Covered 

Entities would need to 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 or the proposed Order.108

This condition would be designed to 

addresses difficulties that Commission 

examinations staff would have 

examining Covered Entities that furnish 

documents in a foreign language. The 

English translations would need to be 

provided promptly. This condition is 

included in the French and UK 

Substituted Compliance Orders.109

VIII. Additional Considerations 

Regarding Supervisory and 

Enforcement Effectiveness in 

Switzerland 

A. General Considerations 

As noted above, Exchange Act rule 

3a71–6 provides that the Commission’s 

assessment of the comparability of the 

requirements of the foreign financial 

regulatory system must account for ‘‘the 

effectiveness of the supervisory program 

administered, and the enforcement 

authority exercised’’ by the foreign 

financial regulatory authority. This 

prerequisite accounts for the 

understanding that substituted 

compliance determinations should 

reflect the reality of the foreign 

regulatory framework, in that rules that 

appear high-quality on paper 

nonetheless should not form the basis 

for substituted compliance if—in 

practice—market participants are 

permitted to fall short of their regulatory 

obligations. This prerequisite, however, 

also recognizes that differences among 

the supervisory and enforcement 

regimes should not be assumed to 

reflect flaws in one regime or 

another.110

In connection with these 

considerations, the Swiss Application 

includes information regarding the 

Swiss supervisory and enforcement 

framework applicable to derivatives 

markets and market participants. This 

includes information regarding the 

supervisory and enforcement authority 

afforded to FINMA to promote 

compliance with applicable 

requirements, applicable supervisory 

and enforcement tools and capabilities, 

consequences of non-compliance, and 

the application of FINMA’s supervisory 

and enforcement practices in the crossborder context.111 After review of this 

information, the Commission 

preliminarily believes that the 

framework is reasonably designed to 

promote compliance with the laws 

where substituted compliance has been 

requested. 

In preliminarily concluding that the 

relevant supervisory and enforcement 

considerations are consistent with 

substituted compliance, the 

Commission particularly has considered 

the following factors: 

B. Supervisory Framework in 

Switzerland 

FINMA is the supervisor for the Swiss 

Firms, and all Covered Entities that will 

register as security-based swap dealers 

in the United States. FINMA has the 

ability to request records needed for 

supervision from firms through the 

supervisory process. Every four years, 

FINMA’s Board of Directors publishes 

strategic goals that serve as guidelines 

for FINMA’s operational management. 

Each year, FINMA’s Board of Directors 

uses the strategic goals to define the 

annual supervisory priorities, which are 

incorporated into the annual objectives 

for individual organizational units and 

employees. 

FINMA assigns prudentially 

supervised banks to five supervisory 

categories. Category 1 firms receive the 

most supervisory attention and the staff 

has been told that the Swiss Firms are 

Category 1 firms. FINMA has multiple 

supervisors dedicated to each Category 

1 firm who are in constant dialogue 

with the firms, including weekly contact 

(phone calls, emails) and quarterly 

meetings with senior management. 

Supervisors review the various reports 

filed by the firms, including monthly 

reports related to AML and risk as well 

as daily liquidity reports. The 

supervisors also work with crossdivisional teams, who add expertise to 

the supervision team covering specific 

aspects of the Covered Entity such as 

risk management, AML, and 

compliance/conduct. 

Audit firms play an important role in 

FINMA’s supervisory activities, 

primarily by conducting regulatory 

audits to assess firms’ compliance with 

supervisory requirements, and whether 

they can continue to adhere to these 

requirements in the future. For Category 

1 firms, FINMA defines the audit 

strategy for each firm and audit firms 

are engaged by the bank to conduct the 

regulatory audit annually in line with 

FINMA’s specifications. The audit 

reports are submitted directly to 

FINMA, and include a risk analysis of 

each firm. FINMA can also appoint 

mandataries (mandated auditors 

appointed to assist in ongoing 

supervision by conducting audits at 

supervised institutions) to assist it in 

performing its supervisory duties. 

Mandataries, which may be deployed 

for urgent matters, focus on a specific 

situation or circumstances at an 

individual firm. 

On an annual basis, FINMA conducts 

a formal assessment of the Swiss Firms 

(including assigning a risk rating) taking 

into account internal audit reports, 

external audit reports, annual reports, 

and FINMA’s view of regulatory, 

economic, and business developments. 

FINMA sends the firms an annual 

assessment letter detailing the risk 

rating, any weaknesses that have been 

identified (with actions for the firms to 

take), and the supervisory priorities for 

the year. Firms are typically required to 

submit regular progress reports of 

corrective action for any issues 

identified and provide evidence of 

closure. 

FINMA conducts multiple onsite 

reviews of Category 1 firms each year, 

some of which relate to the derivatives 

business. FINMA conducts two types of 

reviews: (1) Supervisory reviews during 

which FINMA obtains information on 

conceptual issues but also reviews and 

assesses implementation; and (2) deep 

dives, which are narrower in scope. 

When FINMA identifies findings during 

an onsite examination, FINMA provides 

the firm a summary report or feedback 

letter that contains key findings. FINMA 

may direct the firm to develop a 

mitigation plan, reviews the plan for 

adequacy, and tracks the progress of the 

plan until FINMA is satisfied with the 

corrective action taken. In general, firms 

are given a certain period of time within 

which they have to mitigate the 


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112See generally German Substituted Compliance 

Order, 85 FR 85686; French Substituted 

Compliance Order, 86 FR 41612; UK Substituted 

Compliance Order, 86 FR 43318. See also German 

Continued 

identified issues and restore compliance 

with the law. FINRA’s review and 

evaluation of corrective action 

undertaken by the firms is performed on 

a case-by-case basis, depending on the 

severity of the deficiency and the risks 

to be addressed. While minor issues 

may be addressed through 

correspondence, material issues are 

reviewed and evaluated through 

interviews or desk reviews of the 

appropriate material. FINMA can also 

appoint an audit mandatary to confirm 

that corrective action has been taken. 

For more significant issues, FINMA 

supervisory staff can refer the matter to 

FINMA enforcement staff. 

C. Enforcement Authority in 

Switzerland 

As the financial market supervisory 

authority, FINMA is empowered to 

enforce all financial law requirements 

relevant to the Swiss Application. 

Informal investigations may be 

launched whenever FINMA receives 

information about potential regulatory 

irregularities or violations of law. 

Sources of information include, among 

others, referrals from FINMA’s 

supervisory staff, reports by other 

domestic or foreign authorities, or 

complaints from investors and clients. 

Absent a legal obligation to disclose, 

FINMA treats complaints confidentially. 

However, there are no incentives 

provided for whistleblowers, and they 

receive no specific statutory protection. 

At the conclusion of an informal 

investigation, a determination is made 

whether the initial indications of 

violations have been confirmed and are 

sufficiently important, and if other 

relevant factors support opening a 

formal investigation. If a formal 

investigation is launched, the 

Administrative Procedure Act (‘‘APA’’) 

is implicated and provides for certain 

rights and obligations of the involved 

parties. 

FINMA has a broad range of 

investigative tools at its disposal, and is 

empowered with unrestricted access to 

certain books, records and recordings. In 

particular, Article 29 of FINMASA 

stipulates that supervised persons and 

certain associates (including their 

auditors and audit firms) must provide 

FINMA with all information and 

documents FINMA requires to carry out 

its tasks. In addition, other provisions of 

FINMASA and the APA empower 

FINMA to compel witnesses, subject to 

certain statutory prerequisites, and hire 

experts to assist in conducting 

investigations. FINMA is also permitted 

to inspect documents and premises, and 

may investigate trading records from 

securities dealers and trade reports from 

trade venues and repositories. In general 

however, FINMA does not have 

jurisdiction over third parties and 

cannot obtain electronic 

communications held by third parties 

absent a contractual obligation to do so 

between the Covered Firm and the third 

party provider. As needed to fulfill its 

supervisory duties, FINMA may seek to 

obtain the information from public 

prosecutors who are authorized to 

obtain electronic communications. 

After evidence has been gathered, it is 

summarized in a statement of facts 

regarding which the parties are 

permitted to comment. Ultimately, the 

matter is concluded with an order by 

FINMA. The span of time from the 

commencement of an informal 

investigation through the issuance of an 

order varies. As an example, FINMA 

noted that the average length for 2019 

was 14.4 months. FINMASA provides a 

statute of limitations of seven years for 

confiscation and the criminal 

prosecution of minor offenses; there is 

no general statute of limitations 

applicable to the rules related to the 

application for substituted compliance. 

FINMA may order a variety of 

sanctions to enforce the law. The 

primary goal of Swiss financial market 

supervision relevant to the application 

is to maintain and, if necessary, restore 

compliance with the law by Covered 

Entities. In that regard, FINMA is not 

empowered to issue penalties. FINMA 

does have authority to: Issue declaratory 

rulings, order substitution of 

performance by FINMA, publish 

supervisory rulings, impose cease-anddesist orders, require disgorgement of 

illegal profits, issue activity bans against 

individuals, impose industry bans, 

order liquidation or bankruptcy 

procedures, or revoke the license of a 

Covered Firm, among other sanctions. 

FINMA does not return confiscated illgotten gains to harmed investors; 

however, it takes into account remedial 

payments to investors made by the 

Covered Firm when establishing the 

amount to be confiscated. Additionally, 

FINMA has the right and obligation to 

refer conduct to prosecuting authorities 

if it suspects a criminal act by a Covered 

Firm. For example, insider trading and 

price manipulation fall within the remit 

of the public prosecutor. Swiss public 

prosecutors are empowered to take 

coercive measures, such as an asset 

freeze, and seek imposition of fines and 

other criminal law sanctions from 

competent criminal courts. FINMA is 

not empowered to take coercive 

measures. 

FINMA annually publishes its 

enforcement results in the aggregate. As 

a general principle, it does not publish 

individual proceedings unless necessary 

(i) for the protection of the market 

participants or the supervised persons 

and entities, (ii) to correct false or 

misleading information, or (iii) to 

safeguard the reputation of the Swiss 

financial market. Article 34 of 

FINMASA permits FINMA to publish 

the supervisory ruling in an individual 

matter in the case of a serious violation 

of supervisory law. FINMA also 

maintains and publishes on its website 

a warning list of companies and 

individuals who may be carrying out 

unauthorized services and are not 

supervised by FINMA. 

IX. Request for Comment 

A. General Aspects of the Comparability 

Assessments and Proposed Order 

The Commission requests comment 

regarding the preliminary views and 

proposed Order in connection with each 

of the general ‘‘regulatory outcome’’ 

categories addressed above. 

Commenters particularly are invited to 

address, among other issues, whether 

the relevant Swiss provisions generally 

are sufficient to produce regulatory 

outcomes that are comparable to the 

outcomes associated with requirements 

under the Exchange Act, and whether 

the conditions and limitations of the 

proposed Order would adequately 

address potential gaps in the relevant 

regulatory outcomes or would otherwise 

result in any implementation or other 

practical issues. The Commission also 

requests comment upon whether there 

are additional conditions that should be 

added to those in the proposed Order to 

produce comparable regulatory 

outcomes. 

Further, the Commission requests 

comment regarding whether the 

proposed conditions and limitations 

guard against comparability gaps arising 

from the cross-border application of 

Swiss requirements (including when 

SBSDs conduct security-based swap 

business through branches located in 

the United States or in third countries). 

With respect to the proposed 

conditions and limitations, commenters 

also are invited to address any 

differences between Swiss regulatory 

requirements and frameworks and either 

the German, French or UK requirements 

and frameworks that formed the basis 

for the Commission’s conditional and 

proposed conditional grants of 

substituted compliance in those 

countries.112 Would the responses to 


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Notice and Proposed Order, 85 FR 72726; French 

Notice and Proposed Order, 85 FR 85720; UK 

Notice and Proposed Order, 86 FR 18378. 

113 German Notice and Proposed Order, 85 FR at 

72740. 

114French Notice and Proposed Order, 85 FR 

85720 at 85734. 

115French Reopening Release, 86 FR 18341. 

116UK Notice and Proposed Order, 86 FR at 

18406. 

117See German Substituted Compliance Order, 85 

FR at 85689–91; French Substituted Compliance 

Order, 86 FR at 41622–29; UK Substituted 

Compliance Order, 86 FR at 43331–37. See also 

German Notice and Proposed Order, 85 FR at 

72730–32; French Notice and Proposed Order, 85 

FR at 85724–25; UK Notice and Proposed Order, 85 

FR at 18383–85. 

118 German Notice and Proposed Order, 85 FR at 

72740. 

119French Notice and Proposed Order, 85 FR at 

85734. 

120French Reopening Release, 86 FR 18341. 

121UK Notice and Proposed Order, 86 FR at 

18406. 

122See German Substituted Compliance Order, 85 

FR at 85691–92; French Substituted Compliance 

Order, 86 FR at 41639–43; UK Substituted 

Compliance Order, 86 FR at 43347–43353. See also 

German Notice and Proposed Order, 85 FR at 

72732–34; French Notice and Proposed Order, 85 

FR at 85726–28; UK Notice and Proposed Order, 85 

FR at 18389–90. 

123 German Notice and Proposed Order, 85 FR at 

72740. 

124French Notice and Proposed Order, 85 FR at 

85734. 

125French Reopening Release, 86 FR 18341. 

126UK Notice and Proposed Order, 86 FR at 

18406. 

any of the questions that the 

Commission asked in connection with 

the German Notice and Proposed 

Order,113 the French Notice and 

Proposed Order,114 the French 

Reopening Order,115 or the UK Notice 

and Proposed Order 116 differ if those 

questions applied to Swiss regulatory 

requirements and frameworks? 

B. Risk Control Requirements 

The Commission requests comment 

regarding the proposed grant of 

substituted compliance in connection 

with requirements under the Exchange 

Act related to internal risk management 

systems, trade acknowledgement and 

verification, portfolio reconciliation, 

and portfolio compression. Commenters 

particularly are invited to address the 

basis for substituted compliance in 

connection with those risk control 

requirements, and the proposed 

conditions and limitations connected to 

substituted compliance for those 

requirements. 

The Commission further requests 

comment regarding the initial 

determination to not grant substituted 

compliance in connection with dispute 

reporting and trading relationship 

documentation. Commenters 

particularly are invited to address the 

basis for not providing a grant of 

substituted compliance in connection 

with those risk control requirements. 

With respect to all risk control 

requirements, commenters also are 

invited to address any differences 

between Swiss regulatory requirements 

and frameworks and either the German 

or French requirements and frameworks 

that formed the basis for the 

Commission’s conditional grants of 

substituted compliance for those 

countries, or the UK requirements and 

frameworks that formed the basis for the 

Commission’s proposed conditional 

grant of substituted compliance for the 

UK.117 Would the responses to any of 

the questions about risk control 

requirements that the Commission 

asked in connection with the German 

Notice and Proposed Order,118 the 

French Notice and Proposed Order,119

the French Reopener,120 or the UK 

Notice and Proposed Order 121 differ if 

those questions applied to Swiss 

regulatory requirements and 

frameworks? 

C. Internal Supervision, Chief 

Compliance Officer and Additional 

Exchange Act Section 15F(j) 

Requirements 

The Commission requests comment 

regarding the proposed grant of 

substituted compliance in connection 

with requirements under the Exchange 

Act related to internal supervision and 

chief compliance officers, as well as 

additional Exchange Act section 15F(j) 

requirements. Commenters particularly 

are invited to address the basis for 

substituted compliance in connection 

with those risk control requirements, 

and the proposed conditions and 

limitations connected to substituted 

compliance for those requirements. 

With respect to internal supervision 

and chief compliance officer 

requirements, as well as additional 

Exchange Act section 15F(j) 

requirements, commenters also are 

invited to address any differences 

between Swiss regulatory requirements 

and frameworks and either the German 

or French requirements and frameworks 

that formed the basis for the 

Commission’s conditional grants of 

substituted compliance for those 

countries, or the UK requirements and 

frameworks that formed the basis for the 

Commission’s proposed conditional 

grant of substituted compliance for the 

UK.122 In addition, would the responses 

to any of the questions about internal 

supervision or chief compliance officer 

requirements, or the additional 

Exchange Act section 15F(j) 

requirements, that the Commission 

asked in connection with the German 

Notice and Proposed Order,123 the 

French Notice and Proposed Order,124

the French Reopener,125 or the UK 

Notice and Proposed Order 126 differ if 

those questions applied to Swiss 

regulatory requirements and 

frameworks? 

D. Recordkeeping, Reporting, and 

Notification 

The Commission requests comment 

regarding the proposed grants of 

substituted compliance in connection 

with requirements under the Exchange 

Act related to recordkeeping, reporting, 

and notification, as well as the 

requirement of Exchange Act section 

15F(g). Commenters particularly are 

invited to address the basis for 

substituted compliance in connection 

with those requirements, and the 

proposed conditions and limitations 

connected to substituted compliance for 

those requirements. Does Swiss law 

taken as a whole produce regulatory 

outcomes that are comparable to those 

of Exchange Act section 15F(g) and 

Exchange Act rules 18a–5, 18a–6, 18a– 

7, and 18a–8? In this regard, 

commenters are invited to address 

Swiss laws cited for each substituted 

compliance determination with respect 

to the distinct requirements within the 

recordkeeping, reporting, and 

notification rules (i.e., the rules for 

which a more granular approach to 

substituted compliance is being taken). 

With respect to each substituted 

compliance determination, the 

Commission seeks comment on the 

following matters: (1) Will the Swiss 

laws cited for the determination result 

in a comparable regulatory outcome; (2) 

are there additional or alternative Swiss 

laws that should be cited to achieve a 

comparable regulatory outcome; and (3) 

are any of the Swiss laws cited for the 

determination unnecessary to achieve a 

comparable regulatory outcome? 

Commenters particularly are invited 

to address the proposed condition with 

respect to Exchange Act rule 18a–5 that 

the Covered Entity: (1) Preserve all of 

the data elements necessary to create the 

records required by Exchange Act rules 

18a–5(b)(1), (2), (3), and (7); and (2) 

upon request furnish promptly to 

representatives of the Commission the 

records required by those rules. Do the 

relevant Swiss laws require Covered 

Entities to retain the data elements 

necessary to create the records required 

by these rules? If not, please identify 

which data elements are not preserved 

pursuant to the relevant Swiss laws. 

Further, how burdensome would it be 

for a Covered Entity to format the data 


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127 See German Substituted Compliance Order, 

85 FR at 85695–97; French Substituted Compliance 

Order, 86 FR at 41648–57; UK Substituted 

Compliance Order, 86 FR at 43359–69. 

elements into the records required by 

these rules (e.g., a blotter, ledger, or 

securities record, as applicable) if the 

firm was requested to do so? In what 

formats do Covered Entities in 

Switzerland produce this information to 

FINMA or other Swiss authorities? How 

do those formats differ from the formats 

required by Exchange Act rules 18a– 

5(b)(1), (2), (3), and (7)? 

Is it appropriate to structure the 

Commission’s substituted compliance 

determinations in the proposed Order to 

provide Covered Entities with greater 

flexibility to select which distinct 

requirements within the broader 

recordkeeping, reporting, and 

notification rules for which they want to 

apply substituted compliance? Explain 

why or why not. For example, would it 

be more efficient for a Covered Entity to 

comply with certain Exchange Act 

requirements within a given rule (rather 

than apply substituted compliance) 

because it can utilize systems that its 

affiliated broker-dealer has 

implemented to comply with them? If 

so, explain why. If not, explain why not. 

Is it appropriate to permit Covered 

Entities to take a more granular 

approach to the requirements within the 

recordkeeping rules? For example, 

would this approach make it more 

difficult for the Commission to get a 

comprehensive understanding of the 

Covered Entity’s security-based swap 

activities and financial condition? 

Explain why or why not. Would it be 

overly complex for the Covered Entity to 

administer a firm-wide recordkeeping 

system under this approach? Explain 

why or why not. 

Certain of the Commission’s 

recordkeeping and notification 

requirements are fully or partially 

linked to substantive Exchange Act 

requirements for which a positive 

substituted compliance determination 

preliminarily would not be made under 

the proposed Order. In these cases, 

should the Commission not make a 

positive substituted compliance 

determination for the fully linked 

requirement in the recordkeeping or 

notification rules or to the portion of the 

requirement that is linked to a 

substantive Exchange Act requirement? 

In particular, should the Commission 

not make a positive substituted 

compliance determination for 

recordkeeping or notification 

requirements linked to the following 

Exchange Act rules for which a positive 

substituted compliance determination is 

preliminarily not being made: (1) 

Exchange Act rule 15Fh–4; (2) Exchange 

Act rule 15Fh–5; (3) Exchange Act rule 

15Fh–6; (4) Exchange Act rule 18a–4; (5) 

Regulation SBSR; (6) Form SBSE and its 

variations; (7) Exchange Act rule 15Fh– 

1; (8) Exchange Act rule 15Fh–2; and (9) 

Exchange Act rule 15Fi–5? If not, 

explain why. 

Certain of the requirements in the 

Commission’s recordkeeping rules are 

linked to substantive Exchange Act 

requirements where a positive 

substituted compliance determination is 

being made under the proposed Order. 

In these cases, should a positive 

substituted compliance determination 

for the linked requirement in the 

recordkeeping rule be conditioned on 

the Covered Entity applying substituted 

compliance to the linked substantive 

Exchange Act requirement? If not, 

explain why. Should this be the case 

regardless of whether the requirement is 

fully or partially linked to the 

substantive Exchange Act requirement? 

If not, explain why. In particular, 

should substituted compliance for 

recordkeeping, reporting, and 

notification requirements linked to the 

following Exchange Act rules be 

conditioned on the Covered Entity 

applying substituted compliance to the 

linked substantive Exchange Act rule: 

(1) Exchange Act rule 15Fh–3(h); (2) 

Exchange Act rule 15Fi–2; (3) Exchange 

Act rule 15Fi–3; (4) Exchange Act rule 

15Fi–4; and (5) Exchange Act rule 

15Fk–1? If not, explain why. 

Commenters also are invited to 

address the preliminary positive 

substituted compliance determination 

with respect to Exchange Act rule 18a– 

7, which would be conditioned on the 

Covered Entity filing financial and 

operational information with the 

Commission in the manner and format 

specified by the Commission by order or 

rule. Should the Commission require 

Covered Entities with a prudential 

regulator to file the financial and 

operational information using the 

FOCUS Report Part IIC? Are there line 

items on the FOCUS Report Part IIC that 

elicit information that is not included in 

the reports Covered Entities with a 

prudential regulator file with FINMA or 

other Swiss authorities? If so, do 

Covered Entities with a prudential 

regulator record that information in 

their required books and records? Please 

identify any information that is elicited 

in the FOCUS Report Part IIC that is not: 

(1) Included in the financial reports 

filed by Covered Entities with a 

prudential regulator with FINMA or 

other Swiss authorities; or (2) recorded 

in the books and records required of 

Covered Entities with a prudential 

regulator. Would the answer to these 

questions change if references to FFIEC 

Form 031 were not included in the 

FOCUS Report Part IIC? If so, how? As 

a preliminary matter, as a condition of 

substituted compliance should Covered 

Entities with a prudential regulator file 

a limited amount of financial and 

operational information on the FOCUS 

Report Part IIC for a period of two years 

to further evaluate the burden of 

requiring all applicable line items to be 

filled out? If so, which line items should 

be required? To the extent that Covered 

Entities with a prudential regulator 

otherwise report or record information 

that is responsive to the FOCUS Report 

Part IIC, how could the information on 

this report be integrated into a database 

of filings the Commission or its designee 

will maintain for filers of the FOCUS 

Report Parts IIC (e.g., the eFOCUS 

system) to achieve the objective of being 

able to perform cross-form analysis of 

information entered into the uniquely 

numbered line items on the forms? 

Commenters further are invited to 

address any differences between Swiss 

regulatory requirements and frameworks 

and the German, French, and/or UK 

requirements and frameworks that 

formed the basis for the Commission’s 

conditional grants of substituted 

compliance for recordkeeping, 

reporting, and notification requirements 

in those countries.127 Would the 

responses to any of the questions about 

those requirements that the Commission 

asked in connection with the German, 

French, and/or UK notices and 

proposed orders differ if those questions 

applied to Swiss regulatory 

requirements and frameworks? 

E. Supervisory and Enforcement Issues 

The Commission further requests 

comment regarding how to weigh 

considerations regarding supervisory 

and enforcement effectiveness in 

Switzerland as part of the comparability 

assessments. Commenters particularly 

are invited to address relevant issues 

regarding the effectiveness of Swiss 

supervision and enforcement over firms 

that may register with the Commission 

as SBSDs, including but not limited to 

issues regarding: 

• Swiss supervisory and enforcement 

authority, supervisory inspection 

practices and the use of alternative 

supervisory tools, and enforcement tools 

and practices; 

• Swiss supervisory and enforcement 

effectiveness with respect to derivatives 

such as security-based swaps; and 

• Swiss supervision and enforcement 

in the cross-border context (e.g., any 

differences between the oversight of 

firms’ businesses within Switzerland 


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128 17 CFR 200.30–3(a)(89). 

and the oversight of activities and 

branches outside of Switzerland, 

including within the United States). 

For the Commission, by the Division 

of Trading and Markets, pursuant to 

delegated authority.128

J. Matthew DeLesDernier, 

Assistant Secretary. 

Attachment A 

It is hereby determined and ordered, 

pursuant to rule 3a71–6 under the 

Exchange Act, that a Covered Entity (as 

defined in paragraph (e)(1) of this 

Order) may satisfy the requirements 

under the Exchange Act that are 

addressed in paragraphs (b) through (d) 

of this Order so long as the Covered 

Entity is subject to and complies with 

relevant requirements of the Swiss 

Confederation and with the conditions 

to this Order, as amended or superseded 

from time to time. 

(a) General conditions. 

This Order is subject to the following 

general conditions, in addition to the 

conditions specified in paragraphs (b) 

through (d): 

(1) Security-based swaps and 

transactions as ‘‘derivatives’’ or 

‘‘derivative transactions.’’ For each 

condition in paragraphs (b) through (d) 

of this Order that requires the 

application of, and the Covered Entity’s 

compliance with, provisions of FinMIA 

and FMIO, the relevant security-based 

swaps and security-based swap 

transactions are ‘‘derivatives’’ and/or 

‘‘derivative transactions’’ for purposes 

of FinMIA article 2(c), or otherwise are 

described by the relevant language of 

that provision. 

(2) ‘‘Counterparty’’ status. For each 

condition in paragraph (b) through (d) of 

this Order that requires the application 

of, and the Covered Entity’s compliance 

with, the provisions of FinMIA and 

FMIO, the Covered Entity complies with 

the applicable conditions of the Order 

regardless of the Covered Entity’s 

counterparty is a ‘‘counterparty’’ for 

purposes of FinMIA article 93, or 

otherwise is described by the relevant 

language of that provision. 

(3) Counterparty’s status as 

‘‘company.’’ For each condition in 

paragraph (b) through (d) of this Order 

that requires the application of, and the 

Covered Entity’s compliance with, the 

provisions of FMIO, the Covered Entity 

complies with the applicable conditions 

of the Order regardless of whether a 

Covered Entity’s counterparty is a 

‘‘company’’ for purposes of FMIO article 

77, or otherwise is described by the 

relevant language of that provision. 

(4) Covered Entity as ‘‘bank.’’ For each 

condition in paragraph (b) through (d) of 

this Order that requires the application 

of, and the Covered Entity’s compliance 

with, the provisions of the BA and BO 

and/or other Swiss requirements 

adopted pursuant to those provisions, 

the Covered Entity is a ‘‘bank’’ for 

purposes of BA article 1a, or otherwise 

is described by the relevant language of 

that provision. 

(5) Covered Entity as ‘‘systemically 

important.’’ For each condition in 

paragraph (b) through (d) of this Order 

that requires the application of, and the 

Covered Entity’s compliance with, the 

provisions of the FINMA Circular 2017/ 

1, the Covered Entity is ‘‘systemically 

important’’ for purposes of BA article 

8(3) and article 9, or otherwise are 

described by the relevant language of 

that provision. 

(6) Covered Entity as ‘‘category 1.’’ 

For each condition in paragraph (b) 

through (d) of this Order that requires 

the application of, and the Covered 

Entity’s compliance with, the provisions 

of FINMA Circular 2017/1, the Covered 

Entity is supervised as ‘‘category 1,’’ as 

defined in BO articles 2(2) and 2(3) and 

BO Annex 3, or otherwise are described 

by the relevant language of those 

provisions. 

(7) ‘‘Institution-specific approach’’ to 

operational risk quantification. For each 

condition in paragraphs (b) through (d) 

of this Order that requires the 

application of, and the Covered Entity’s 

compliance with, the provisions of 

FINMA Circular 2008/21 margins 45– 

107, the Covered Entity applies the 

institution-specific approach, as defined 

in CAO article 94, to quantifying capital 

requirements for operational risk, as 

approved by FINMA. 

(8) Memorandum of Understanding 

with FINMA. The Commission and 

FINMA have a supervisory and 

enforcement memorandum of 

understanding and/or other arrangement 

addressing cooperation with respect to 

this Order at the time the Covered Entity 

complies with the relevant requirements 

under the Exchange Act via compliance 

with one or more provisions of this 

Order. 

(9) Notice to Commission. A Covered 

Entity relying on this Order must 

provide notice of its intent to rely on 

this Order by notifying the Commission 

in writing. Such notice must be sent to 

an email address provided on the 

Commission’s website. The notice must 

include the contact information of an 

individual who can provide further 

information about the matter that is the 

subject of the notice. The notice must 

identify each specific substituted 

compliance determination within 

paragraphs (b) through (d) of the Order 

for which the Covered Entity intends to 

apply substituted compliance. A 

Covered Entity must promptly provide 

an amended notice if it modifies its 

reliance on the substituted compliance 

determinations in this Order. 

(10) Notification Requirements 

Related to Changes in Capital. A 

Covered Entity that is prudentially 

regulated relying on this Order must 

apply substituted compliance with 

respect to the requirements of Exchange 

Act rule 18a–8(c) and the requirements 

of Exchange Act rule 18a–8(h) as 

applied to Exchange Act rule 18a–8(c). 

(b) Substituted compliance in 

connection with risk control 

requirements. 

This Order extends to the following 

provisions related to risk control: 

(1) Internal risk management. The 

requirements of Exchange Act section 

15F(j)(2) and relevant aspects of 

Exchange Act rule 15Fh–3(h)(2)(iii)(I), 

provided that the Covered Entity is 

subject to and complies with the 

requirements of: BO article 12; FINMA 

Circular 2017/1 margins 9–14, 31–49, 

52–76, 82–97; and FINMA Circular 

2008/21 margins 45, 54–63, 65–68, 117– 

138. 

(2) Trade acknowledgement and 

verification. The requirements of 

Exchange Act rule 15Fi–2, provided that 

the Covered Entity is subject to and 

complies with the requirements of 

FinMIA articles 108(a) and (c); and 

FMIO articles 95, 97, and 113(1). 

(3) Portfolio reconciliation. The 

requirements of Exchange Act rule 

15Fi–3, other than paragraph (c) to that 

rule, provided that: 

(i) The Covered Entity is subject to 

and complies with the requirements of 

FINMASA article 29; FinMIA article 

108(b) and (c); and FMIO articles 96, 97 

and 113(1)(d); 

(ii) The Covered Entity does not apply 

FinMIA article 108(b)’s exception for 

‘‘small non-financial counterparties’’ as 

defined in FinMIA article 98. 

(4) Portfolio compression. The 

requirements of Exchange Act rule 

15Fi–4, provided that: 

(i) The Covered Entity is subject to 

and complies with the requirements of 

FinMIA article 108(d); and FMIO 

articles 98 and 113(1)(d); and 

(ii) The Covered Entity does not apply 

the portion of FinMIA article 108(d) that 

excludes application of the requirement 

when there are fewer than 500 noncentrally cleared OTC derivatives 

transactions outstanding. 

(c) Substituted compliance in 

connection with internal supervision 

and compliance requirements and 


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certain Exchange Act section 15F(j) 

requirements. 

This Order extends to the following 

provisions related to internal 

supervision and compliance and 

Exchange Act section 15F(j) 

requirements: 

(1) Internal supervision. The 

requirements of Exchange Act rule 

15Fh–3(h) and Exchange Act sections 

15F(j)(4)(A) and (j)(5), provided that: 

(i) The Covered Entity is subject to 

and complies with the requirements 

identified in paragraph (c)(3) of this 

Order; and 

(ii) This paragraph (c) does not extend 

to the requirements of paragraph 

(h)(2)(iii)(I) to rule 15Fh–3 to the extent 

those requirements pertain to 

compliance with Exchange Act sections 

15F(j)(2), (j)(3), (j)(4)(B) and (j)(6), or to 

the general and supporting provisions of 

paragraph (h) to rule 15Fh–3 in 

connection with those Exchange Act 

sections. 

(2) Chief compliance officers. The 

requirements of Exchange Act section 

15F(k) and Exchange Act rule 15Fk–1, 

provided that: 

(i) The Covered Entity complies with 

the requirements identified in paragraph 

(c)(3) of this Order; 

(ii) All reports required pursuant to 

FINMA Circular 2017/1 margins 78–81 

must also: 

(A) Be provided to the Commission at 

least annually, and in the English 

language; 

(B) Include a certification signed by 

the chief compliance officer or senior 

officer (as defined in Exchange Act rule 

15Fk–1(e)(2)) of the Covered Entity that, 

to the best of the certifier’s knowledge 

and reasonable belief and under penalty 

of law, the report is accurate and 

complete in all material respects; 

(C) Address the firm’s compliance 

with: 

(i) Applicable requirements under the 

Exchange Act; and 

(ii) The other applicable conditions to 

this Order in connection with 

requirements for which the Covered 

Entity is relying on this Order; 

(D) Be provided to the Commission no 

later than 15 days following the earlier 

of: 

(i) The submission of the report to the 

Covered Entity’s management body; or 

(ii) The time the report is required to 

be submitted to the management body; 

and 

(E) Together cover the entire period 

that the Covered Entity’s annual 

compliance report referenced in 

Exchange Act section 15F(k)(3) and 

Exchange Act rule 15Fk–1(c) would be 

required to cover. 

(3) Applicable supervisory and 

compliance requirements. Paragraphs 

(c)(1) and (c)(2) are conditioned on the 

Covered Entity being subject to and 

complying with the following 

requirements: BA articles 3(2)(c), and 3f; 

BO articles 12, 14e, and 14g; FINMA 

Circular 2017/1 articles 9–97; FINMA 

Circular 2008/21 margins 54–62, 65–68, 

121–122, and 128–136.5; FINMA 

Circular 2013/8 margins 45–61, 64; 

FINMA Circular 2010/1 margins 16–74; 

and FINMA Circular 2018/3 margins 

14–35. 

(4) Additional condition to paragraph 

(c)(1). Paragraph (c)(1) further is 

conditioned on the requirement that the 

Covered Entity complies with the 

provisions specified in paragraph (c)(3) 

as if those provisions also require 

compliance with: 

(i) Applicable requirements under the 

Exchange Act; and 

(ii) The other applicable conditions to 

this Order in connection with 

requirements for which the Covered 

Entity is relying on this Order. 

(d) Substituted compliance in 

connection with recordkeeping, 

reporting, and notification 

requirements. 

This Order extends to the following 

provisions that apply to a Covered 

Entity related to recordkeeping, 

reporting, and notification: 

(1)(i) Make and keep current certain 

records. The requirements of the 

following provisions of Exchange Act 

rule 18a–5, provided that the Covered 

Entity complies with the relevant 

conditions in this paragraph (d)(1)(i) 

and with the applicable conditions in 

paragraph (d)(1)(ii): 

(A) The requirements of Exchange Act 

rule 18a–5(b)(1), provided that the 

Covered Entity is subject to and 

complies with the requirements of 

FMIO–FINMA article 1; FinMIA articles 

104 and 106; FMIO annex 2; CO article 

958f; 

(B) The requirements of Exchange Act 

rule 18a–5(b)(2), provided that the 

Covered Entity is subject to and 

complies with the requirements of CO 

article 958f; AccO article 1; FinMIA 

article 106; 

(C) The requirements of Exchange Act 

rule 18a–5(b)(3), provided that the 

Covered Entity is subject to and 

complies with the requirements of CO 

article 958f; FinMIA articles 104 and 

106; FMIO annex 2; 

(D) The requirements of Exchange Act 

rule 18a–5(b)(4), provided that the 

Covered Entity is subject to and 

complies with the requirements of 

FinMIA article 38; FMIO article 36; 

FinIA article 50; FMIO–FINMA article 

1; CO article 958f; 

(E) The requirements of Exchange Act 

rule 18a–5(b)(5), provided that the 

Covered Entity is subject to and 

complies with the requirements of 

FMIO article 38; FinIA article 50; 

FMIO–FINMA article 1; CO article 958f; 

(F) The requirements of Exchange Act 

rules 18a–5(b)(6) and (b)(11), provided 

that: 

(1) The Covered Entity is subject to 

and complies with the requirements of 

FinMIA articles 106 and 108(a); FMIO 

article 95; CO article 958f; and 

(2) The Covered Entity applies 

substituted compliance for the 

requirements of Exchange Act rule 

15Fi–2 pursuant to this Order; 

(G) The requirements of Exchange Act 

rule 18a–5(b)(7), provided that the 

Covered Entity is subject to and 

complies with the requirements of 

FMIO article 38; FinIA article 50; 

FMIO–FINMA article 1; FMIO annex 2; 

FinMIA articles 104 and 106; AMLA 

article 3; CO article 958f; 

(H) The requirements of Exchange Act 

rule 18a–5(b)(8), provided that the 

Covered Entity is subject to and 

complies with the requirements of CO 

article 958f; BA article 3; BO article 12; 

CO article 330a; FINMA Circular 2008/ 

21, Annex 3, margins 30–33; 

(I) The requirements of Exchange Act 

rule 18a–5(b)(13), regarding one or more 

provisions of Exchange Act rules 15Fh– 

3 or 15Fk–1 for which substituted 

compliance is available under this 

Order, provided that: 

(1) The Covered Entity is subject to 

and complies with the requirements of 

FINMA Circular 2017/1; BA article 3; 

CO article 958f, in each case with 

respect to the relevant security-based 

swap or activity; 

(2) With respect to the portion of 

Exchange Act rule 18a–5(b)(13) that 

relates to one or more provisions of 

Exchange Act rule 15Fh–3 for which 

substituted compliance is available 

under this Order, the Covered Entity 

applies substituted compliance for such 

business conduct standard(s) of 

Exchange Act rule 15Fh–3 pursuant to 

this Order, as applicable, with respect to 

the relevant security-based swap or 

activity; and 

(3) With respect to the portion of 

Exchange Act rule 18a–5(b)(13) that 

relates to Exchange Act rule 15Fk–1, the 

Covered Entity applies substituted 

compliance for Exchange Act section 

15F(k) and Exchange Act rule 15Fk–1 

pursuant to this Order; 

(J) The requirements of Exchange Act 

rule 18a–5(b)(14)(i) and (ii), provided 

that: 


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(1) The Covered Entity is subject to 

and complies with the requirements of 

FinMIA articles 104 and 106; CO article 

958f; and 

(2) The Covered Entity applies 

substituted compliance for Exchange 

Act rule 15Fi–3 pursuant to this Order; 

and 

(K) The requirements of Exchange Act 

rule 18a–5(b)(14)(iii), provided that: 

(1) The Covered Entity is subject to 

and complies with the requirements of 

FinMIA articles 104 and 106; CO article 

958f; and 

(2) The Covered Entity applies 

substituted compliance for Exchange 

Act rule 15Fi–4 pursuant to this Order. 

(ii) Paragraph (d)(1)(i) is subject to the 

following further conditions: 

(A) Paragraphs (d)(1)(i)(A) through (C) 

and (G) are subject to the condition that 

the Covered Entity preserves all of the 

data elements necessary to create the 

records required by the applicable 

Exchange Act rules cited in such 

paragraphs and upon request furnishes 

promptly to representatives of the 

Commission the records required by 

those rules; 

(B) A Covered Entity may apply the 

substituted compliance determination 

in paragraph (d)(1)(i)(I) to records of 

compliance with Exchange Act rule 

15Fh–3(h) in respect of one or more 

security-based swaps or activities 

related to security-based swaps; and 

(C) This Order does not extend to the 

requirements of Exchange Act rule 18a– 

5(b)(9), (b)(10), or (b)(12). 

(2)(i) Preserve certain records. The 

requirements of the following 

provisions of Exchange Act rule 18a–6, 

provided that the Covered Entity 

complies with the relevant conditions in 

this paragraph (d)(2)(i) and with the 

applicable conditions in paragraph 

(d)(2)(ii): 

(A) The requirements of Exchange Act 

rule 18a–6(a)(2), provided that the 

Covered Entity is subject to and 

complies with the requirements of 

FinMIA article 106; CO article 958f; 

FMIO–FINMA article 1(4); AccO article 

3; FINMA Circular 2008/4 Marg. 16; 

(B) The requirements of Exchange Act 

rule 18a–6(b)(2)(i), provided that the 

Covered Entity is subject to and 

complies with the requirements of 

FinMIA article 106; CO article 958f; 

FMIO–FINMA article 1(4); AccO article 

3; FINMA Circular 2008/4 Marg. 16; 

(C) The requirements of Exchange Act 

rule 18a–6(b)(2)(ii), provided that the 

Covered Entity is subject to and 

complies with the requirements of CO 

article 958f; FINMA Circular 2013/8 

Marg. 60 and Marg. 61; 

(D) The requirements of Exchange Act 

rule 18a–6(b)(2)(iii), provided that the 

Covered Entity is subject to and 

complies with the requirements of CO 

article 958f; AMLA article 7(3); AMLO– 

FINMA article 5(1); 

(E) The requirements of Exchange Act 

rule 18a–6(b)(2)(iv), provided that the 

Covered Entity is subject to and 

complies with the requirements of CO 

article 958f; FINMA Circular 2013/8 

Marg. 60 and Marg. 61; 

(F) The requirements of Exchange Act 

rule 18a–6(b)(2)(vii), regarding one or 

more provisions of Exchange Act rules 

15Fh–3 or 15Fk–1 for which substituted 

compliance is available under this 

Order, provided that: 

(1) The Covered Entity is subject to 

and complies with the requirements of 

FINMA Circular 2017/1; BA article 3; 

CO article 958f, in each case with 

respect to the relevant security-based 

swap or activity; 

(2) With respect to the portion of 

Exchange Act rule 18a–6(b)(2)(vii) that 

relates to one or more provisions of 

Exchange Act rule 15Fh–3 for which 

substituted compliance is available 

under this Order, the Covered Entity 

applies substituted compliance for such 

business conduct standard(s) of 

Exchange Act rule 15Fh–3 pursuant to 

this Order, as applicable, with respect to 

the relevant security-based swap or 

activity; and 

(3) With respect to the portion of 

Exchange Act rule 18a–6(b)(2)(vii) that 

relates to Exchange Act rule 15Fk–1, the 

Covered Entity applies substituted 

compliance for Exchange Act section 

15F(k) and Exchange Act rule 15Fk–1 

pursuant to this Order; 

(G) The requirements of Exchange Act 

rule 18a–6(c), provided that: 

(1) The Covered Entity is subject to 

and complies with the requirements of 

BA article 3; BO article 12; CO articles 

686 and 958f; and 

(2) This Order does not extend to the 

requirements of Exchange act rule 18a– 

6(c) relating to Forms SBSE, SBSE–A, 

SBSE–C, SBSE–W, all amendments to 

these forms, and all other licenses or 

other documentation showing the 

registration of the Covered Entity with 

any securities regulatory authority or 

the U.S. Commodity Futures Trading 

Commission; 

(H) The requirements of Exchange Act 

rule 18a–6(d)(1), provided that the 

Covered Entity is subject to and 

complies with the requirements of CO 

article 958f; BA article 3; BO article 12; 

CO article 330a; FINMA Circular 2008/ 

21, Annex 3, margins 30–33; 

(I) The requirements of Exchange Act 

rule 18a–6(d)(2)(ii), provided that the 

Covered Entity is subject to and 

complies with the requirements of BA 

article 3; BO article 12; CO article 958f; 

FINMA Circular 2008/21 margins 122, 

128, 131, and Appendix 2; 

(J) The requirements of Exchange Act 

rule 18a–6(d)(3)(ii), provided that the 

Covered Entity is subject to and 

complies with the requirements of CO 

article 958f; BA article 3; BO article 12; 

(K) The requirements of Exchange Act 

rule 18a–6(d)(4) and (d)(5), regarding 

one or more provisions of Exchange Act 

rules 15Fi–3 or 15Fi–4 for which 

substituted compliance is available 

under this Order, provided that: 

(1) The Covered Entity is subject to 

and complies with the requirements of 

CO article 958f; FinMIA article 106; 

(2) With respect to the portion of 

Exchange Act rule 18a–6(d)(4) and (d)(5) 

that relates to Exchange Act rules 15Fi– 

3 or 15Fi–4, the Covered Entity applies 

substituted compliance for Exchange 

Act rules 15Fi–3 and 15Fi–4 pursuant to 

this Order; and 

(3) This Order does not extend to the 

requirements of Exchange Act rule 18a– 

6(d)(4) and (d)(5) relating to Exchange 

Act rule 15Fi–5; 

(L) The requirements of Exchange Act 

rule 18a–6(e), provided that the Covered 

Entity is subject to and complies with 

the requirements of AccO; and 

(M) The requirements of Exchange 

Act rule 18a–6(f), provided that the 

Covered Entity is subject to and 

complies with the requirements of 

FINMA Circular 2018/3. 

(ii) Paragraph (d)(2)(i) is subject to the 

following further conditions: 

(A) A Covered Entity may apply the 

substituted compliance determination 

in paragraph (d)(2)(i)(F) to records 

related to Exchange Act rule 15Fh–3(h) 

in respect of one or more security-based 

swaps or activities related to securitybased swaps; and 

(B) This Order does not extend to the 

requirements of Exchange Act rule 18a– 

6(b)(2)(v), (b)(2)(vi), or (b)(2)(viii). 

(3) File Reports. The requirements of 

the following provisions of Exchange 

Act rule 18a–7, provided that the 

Covered Entity complies with the 

relevant conditions in this paragraph 

(d)(3): 

(i) The requirements of Exchange Act 

rule 18a–7(a)(2) and the requirements of 

Exchange Act rule 18a–7(j) as applied to 

the requirements of Exchange Act rule 

18a–7(a)(2), provided that: 

(A) The Covered Entity is subject to 

and complies with the requirements of 

BA article 6a; BO article 32; CAO article 

16; FINMA Circular 2020/1; and FINMA 

Circular 2016/1; and 

(B) The Covered Entity files periodic 

unaudited financial and operational 

information with the Commission or its 

designee in the manner and format 

required by Commission rule or order 


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Federal Register / Vol. 86, No. 155 / Monday, August 16, 2021 / Notices 45791 

and presents the financial information 

in the filing in accordance with 

generally accepted accounting 

principles that the Covered Entity uses 

to prepare general purpose publicly 

available or available to be issued 

financial statements in Switzerland. 

(4)(i) Provide Notification. The 

requirements of the following 

provisions of Exchange Act rule 18a–8, 

provided that the Covered Entity 

complies with the relevant conditions in 

this paragraph (d)(4)(i) and with the 

applicable conditions in paragraph 

(d)(4)(ii): 

(A) The requirements of Exchange Act 

rule 18a–8(c) and the requirements of 

Exchange Act rule 18a–8(h) as applied 

to the requirements of Exchange Act 

rule 18a–8(c), provided that the Covered 

Entity is subject to and complies with 

the requirements of FINMASA article 

29(2); CAO articles 14, 42(3), 101, and 

130(4); and Liquidity Ordinance articles 

17b, and 26(2). 

(B) The requirements of Exchange Act 

rule 18a–8(d) and the requirements of 

Exchange Act rule 18a–8(h) as applied 

to the requirements of Exchange Act 

rule 18a–8(d), provided that: 

(1) The Covered Entity is subject to 

and complies with the requirements of 

FINMASA article 29(2); CAO articles 14, 

42(3), 101, and 130(4); and Liquidity 

Ordinance articles 17b, and 26(2); and 

(2) This Order does not extend to the 

requirements of Exchange Act rule 18a– 

8(d) to give notice with respect to books 

and records required by Exchange Act 

rule 18a–5 for which the Covered Entity 

does not apply substituted compliance 

pursuant to this Order; 

(ii) Paragraph (d)(4)(i) is subject to the 

following further conditions: 

(A) The Covered Entity: 

(1) Simultaneously sends a copy of 

any notice required to be sent by Swiss 

law cited in this paragraph of the Order 

to the Commission in the manner 

specified on the Commission’s website; 

and 

(2) Includes with the transmission the 

contact information of an individual 

who can provide further information 

about the matter that is the subject of 

the notice; and 

(B) This Order does not extend to the 

requirements of paragraph (g) of rule 

18a–8 or to the requirements of 

Exchange Act rule 18a–8(h) as applied 

to such requirements. 

(5) Daily Trading Records. The 

requirements of Exchange Act section 

15F(g), provided that the Covered Entity 

is subject to and complies with the 

requirements of CO article 958f; FMIO 

article 36; FMIO–FINMA article 1; 

FinMIA articles 38, 104, and 106; 

FINMA Circular 2013/8 marg. 60 and 

marg. 61. 

(6) Examination and Production of 

Records. Notwithstanding the forgoing 

provisions of paragraph (d) of this 

Order, this Order does not extend to, 

and Covered Entities remain subject to, 

the requirement of Exchange Act section 

15F(f) to keep books and records open 

to inspection by any representative of 

the Commission and the requirement of 

Exchange Act rule 18a–6(g) to furnish 

promptly to a representative of the 

Commission legible, true, complete, and 

current copies of those records of the 

Covered Entity that are required to be 

preserved under Exchange Act rule 18a– 

6, or any other records of the Covered 

Entity that are subject to examination or 

required to be made or maintained 

pursuant to Exchange Act section 15F 

that are requested by a representative of 

the Commission. 

(7) English Translations. 

Notwithstanding the forgoing provisions 

of paragraph (d) of this Order, to the 

extent documents are not prepared in 

the English language, 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. 

(e) Definitions. 

(1) ‘‘Covered Entity’’ means an entity 

that: 

(i) Is a security-based swap dealer 

registered with the Commission; 

(ii) Is not a ‘‘U.S. person,’’ as that term 

is defined in rule 3a71–3(a)(4) under the 

Exchange Act; 

(iii) Is a systemically important bank 

authorized by FINMA to conduct 

banking activities in the Swiss 

Confederation; and 

(iv) Is supervised by FINMA under 

the intensive and continual supervision 

model as a Category 1 firm as that term 

is defined in BO Annex 3. 

(2) ‘‘AccO’’ means the Ordinance on 

the Maintenance and Retention of 

Accounts (Accounts Ordinance), CC 

221.431, as amended from time to time. 

(3) ‘‘AMLA’’ means the Federal Act 

on Combating Money Laundering and 

Terrorist Financing (Anti-Money 

Laundering Act), CC 955, as amended 

from time to time. 

(4) ‘‘AMLO–FINMA’’ means the 

Ordinance of the Swiss Financial 

Market Supervisory Authority on the 

Prevention of Money Laundering and 

the Financing of Terrorist Activities 

(FINMA Anti-Money Laundering 

Ordinance), CC 955.033.0, as amended 

from time to time. 

(5) ‘‘BA’’ means the Federal Act on 

Banks and Savings Banks (Banking Act), 

CC 952, as amended from time to time. 

(6) ‘‘BO’’ means the Ordinance on 

Banks and Savings Banks (Banking 

Ordinance), CC 952.02, as amended 

from time to time. 

(7) ‘‘CAO’’ means the Ordinance 

concerning Capital Adequacy and Risk 

Diversification for Banks and Securities 

Dealers (Capital Adequacy Ordinance), 

CC 952.03, as amended from time to 

time. 

(8) ‘‘CO’’ means the Federal Act on 

the Amendment of the Swiss Civil Code 

(Part Five: The Code of Obligations, CC 

220, as amended from time to time. 

(9) ‘‘FinIA’’ means Federal Act on 

Financial Institutions (Financial 

Institutions Act), CC 954.1, as amended 

from time to time. 

(10) ‘‘FINMA’’ means the Swiss 

Financial Market Supervisory 

Authority. 

(11) ‘‘FINMA Circular 2008/4’’ means 

the FINMA Circular 2008/4, Securities 

Journals. 

(12) ‘‘FINMA Circular 2008/21’’ 

means the FINMA Circular 2008/21, 

Operational Risk—Banks. 

(13) ‘‘FINMA Circular 2010/1’’ means 

the FINMA Circular 2010/1, 

Remuneration schemes. 

(14) ‘‘FINMA Circular 2013/8’’ means 

the FINMA Circular 2013/8, Market 

conduct rules, Supervisory rules on 

market conduct in securities trading. 

(15) ‘‘FINMA Circular 2016/1’’ means 

the FINMA Circular 2016/1, 

Disclosure—Banks. 

(16) ‘‘FINMA Circular 2017/1’’ means 

the FINMA Circular 2017/1, Corporate 

Governance—Banks. 

(17) ‘‘FINMA Circular 2017/7’’ means 

the FINMA Circular 2017/7, Credit 

Risk—Banks. 

(18) ‘‘FINMA Circular 2018/3’’ means 

the FINMA Circular 2018/3, 

Outsourcing—Banks and Insurers. 

(19) ‘‘FINMA Circular 2020/1’’ means 

the FINMA Circular 2020/1, 

Accounting—Banks. 

(20) ‘‘FINMASA’’ means the Federal 

Act on the Swiss Financial Market 

Supervisory Authority (Financial 

Market Supervision Act), CC 956.1, as 

amended from time to time. 

(21) ‘‘FinMIA’’ means the Federal Act 

on Financial Market Infrastructures and 

Market Conduct in Securities and 

Derivatives Trading (Financial Market 

Infrastructure Act), CC 958.1, as 

amended from time to time. 

(22) ‘‘FMIO’’ means the Ordinance on 

Financial Market Infrastructures and 

Market Conduct in Securities and 

Derivatives Trading (Financial Market 

Infrastructure Ordinance), CC 958.11, as 

amended from time to time. 


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45792 Federal Register / Vol. 86, No. 155 / Monday, August 16, 2021 / Notices 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3Rule 14.11(m)(3)(A) defines the term ‘‘Tracking 

Fund Share’’ as a security that: (i) Represents an 

interest in an investment company registered under 

the Investment Company Act of 1940 (‘‘Investment 

Company’’) organized as an open-end management 

investment company, that invests in a portfolio of 

securities selected by the Investment Company’s 

investment adviser consistent with the Investment 

Company’s investment objectives and policies; (ii) 

is issued in a specified aggregate minimum number 

in return for a deposit of a specified Tracking 

Basket and/or a cash amount with a value equal to 

the next determined net asset value; (iii) when 

aggregated in the same specified minimum number, 

may be redeemed at a holder’s request, which 

holder will be paid a specified Tracking Basket and/ 

or a cash amount with a value equal to the next 

determined net asset value; and (iv) the portfolio 

holdings for which are disclosed within at least 60 

days following the end of every fiscal quarter. 

4 15 U.S.C. 80a et seq. 

(23) ‘‘FMIO–FINMA’’ means the 

Ordinance of the Swiss Financial 

Market Supervisory Authority on 

Financial Market Infrastructures and 

Market Conduct in Securities and 

Derivatives Trading (FINMA Financial 

Market Infrastructure Ordinance), CC 

958.111, as amended from time to time. 

(24) ‘‘Liquidity Ordinance’’ means the 

Ordinance on the Liquidity of Banks. 

[FR Doc. 2021–17424 Filed 8–13–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92626; File No. SR– 

CboeBZX–2021–053] 

Self-Regulatory Organizations; Cboe 

BZX Exchange, Inc.; Notice of Filing of 

a Proposed Rule Change To Amend 

Rule 14.11(m) (Tracking Fund Shares) 

To Provide for the Use of Custom 

Baskets Consistent With the 

Exemptive Relief Issued Pursuant to 

the Investment Company Act of 1940 

Applicable to a Series of Tracking 

Fund Shares 

August 10, 2021. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Exchange Act’’),1 and Rule 19b–4 

thereunder,2 notice is hereby given that 

on August 3, 2021, Cboe BZX Exchange, 

Inc. (‘‘Exchange’’ or ‘‘BZX’’) filed with 

the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by the Exchange. 

The Commission is publishing this 

notice to solicit comments on the 

proposed rule change from interested 

persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Cboe BZX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BZX’’) proposes to 

amend Rule 14.11(m) (Tracking Fund 

Shares) to provide for the use of 

‘‘Custom Baskets’’ consistent with the 

exemptive relief issued pursuant to the 

Investment Company Act of 1940 

(‘‘Investment Company Act’’) applicable 

to a series of Tracking Fund Shares. The 

text of the proposed rule change is 

provided in Exhibit 5. 

The text of the proposed rule change 

is also available on the Exchange’s 

website (http://markets.cboe.com/us/ 

equities/regulation/rule_filings/bzx/), at 

the Exchange’s Office of the Secretary, 

and at the Commission’s Public 

Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend 

Rule 14.11(m) (Tracking Fund Shares) 3

to provide for the use of ‘‘Custom 

Baskets’’ consistent with the exemptive 

relief issued pursuant to the Investment 

Company Act 4 applicable to a series of 

Tracking Fund Shares. 

To effectuate this change, the 

Exchange proposes the following 

amendments to Rule 14.11(m). First, the 

proposed rule change adopts new 

subparagraph (F) under Rule 

14.11(m)(3) (Definitions), which defines 

‘‘Custom Basket’’, for the purposes of 

Rule 14.11(m), to mean a portfolio of 

securities that is different from the 

Tracking Basket and is otherwise 

consistent with the exemptive relief 

issued pursuant to the Investment 

Company Act applicable to a series of 

Tracking Fund Shares. The proposed 

rule change makes conforming 

amendments to the definition of 

Tracking Fund Shares in Rule 

14.11(m)(3)(A) and Reporting Authority 

in Rule 14.11(m)(3)(C). The proposed 

rule change amends the definition of 

‘‘Tracking Fund Share’’ in Rule 

14.11(m)(3)(A) to provide for creations 

of shares in return for a deposit by the 

purchaser of, and redemptions of shares 

at a holder’s request in return for, a 

Custom Basket rather than a Tracking 

Basket to the extent permitted by a 

fund’s exemptive relief. In addition, the 

proposed rule change amends the 

definition of ‘‘Reporting Authority’’ in 

respect of a particular series of Tracking 

Fund Shares in Rule 14.11(m)(3)(C) to 

provide for Custom Baskets to the extent 

permitted by a fund’s exemptive relief. 

Currently, ‘‘Reporting Authority’’ in 

respect of a particular series of Tracking 

Fund Shares means the Exchange, an 

institution, or a reporting service 

designated by the Exchange or by the 

exchange that lists a particular series of 

Tracking Fund Shares (if the Exchange 

is trading such series pursuant to 

unlisted trading privileges) as the 

official source for calculating and 

reporting information relating to such 

series, including, but not limited to, the 

Tracking Basket; the Fund Portfolio; the 

amount of any cash distribution to 

holders of Tracking Fund Shares, net 

asset value, or other information relating 

to the issuance, redemption or trading of 

Tracking Fund Shares. Rule 

14.11(m)(3)(C) further provides that a 

series of Tracking Fund Shares may 

have more than one Reporting 

Authority, each having different 

functions. The proposed rule change 

adds ‘‘Custom Basket’’ to the nonexclusive list of information relating to 

Tracking Fund Shares that a Reporting 

Authority calculates and reports, i.e., 

including, but not limited to, the 

Tracking Basket; the Fund Portfolio; the 

amount of any cash distribution to 

holders of Tracking Fund Shares, net 

asset value, or other information relating 

to the issuance, redemption or trading of 

Tracking Fund Shares. 

Second, the proposed rule change 

amends Rule 14.11(m)(4) (Initial and 

Continued Listing), which currently 

provides criteria that Tracking Fund 

Shares must satisfy for initial and 

continued listing on the Exchange, to 

incorporate specific initial and 

continued listing criteria for Custom 

Baskets. Specifically, Rule 

14.11(m)(4)(A)(ii) currently provides 

that the Exchange will obtain a 

representation from the issuer of each 

series of Tracking Fund Shares that the 

net asset value per share for the series 

will be calculated daily and that each of 

the following will be made available to 

all market participants at the same time 

when disclosed: the net asset value, the 


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