Document ID: SEC-2021-1501-0001
Agency: sec
Document Type: Notice
Title: Order Specifying the Manner and Format of Filing Unaudited Financial and Operational Information: Security-Based Swap Dealers and Major Security-Based Swap Participants that are not U.S. Persons and are Relying on Substituted Compliance Determinations with Respect to Rule 18a-7
Posted Date: 2021-10-26T04:00Z

[Federal Register Volume 86, Number 204 (Tuesday, October 26, 2021)]
[Notices]
[Pages 59208-59258]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-22817]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93335]

Order Specifying the Manner and Format of Filing Unaudited 
Financial and Operational Information by Security-Based Swap Dealers 
and Major Security-Based Swap Participants That Are Not U.S. Persons 
and Are Relying on Substituted Compliance Determinations With Respect 
to Rule 18a-7

I. Introduction

    Currently, broker-dealers are required to file on a monthly or 
quarterly basis the applicable part of Form X-17A-5 (``FOCUS 
Report'').\1\ Broker-dealers use the FOCUS Report to submit unaudited 
financial and operational information that is used by the Commission 
and broker-dealer self-regulatory organizations to monitor and 
supervise the firms. On September 19, 2019, the U.S. Securities and 
Exchange Commission (``Commission'') adopted recordkeeping, reporting, 
and notification requirements applicable to registered security-based 
swap dealers and major security-based swap participants (collectively, 
``SBS Entities'') and additional recordkeeping and reporting 
requirements for broker-dealers to account for their security-based 
swap activities.\2\ As part of this initiative, the Commission adopted 
Exchange Act rule 18a-7 (``Rule 18a-7''), amended Part II of the FOCUS 
Report, and adopted a new Part IIC of the FOCUS Report.\3\ Rule 18a-7 
applies to SBS Entities that also are registered with the Commission as 
OTC derivatives dealers (a special purpose broker-dealer that must 
limit its business to dealing in over-the-counter derivatives) or that 
do not have a broker-dealer registration.\4\ Under this rule, SBS 
Entities that do not have a prudential regulator are required to file 
Part II of the FOCUS Report on a monthly basis and SBS Entities that 
have a prudential regulator are required to file Part IIC of the FOCUS 
Report on a quarterly basis.\5\ Rule 18a-7 requires SBS Entities to 
file Part II or Part IIC of the FOCUS Report with the Commission or its 
designee.\6\ The Commission has designated the Financial Industry 
Regulatory Association, Inc. (``FINRA'') as the organization with which 
SBS Entities must file Part II or Part IIC of the FOCUS Report.\7\
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    \1\ See 17 CFR 240.17a-5(a).
    \2\ See Recordkeeping and Reporting Requirements for Security-
Based Swap Dealers, Major Security-Based Swap Participants, and 
Broker-Dealers, Securities Exchange Act of 1934 (``Exchange Act'') 
Release No. 87005 (Sept. 19, 2019), 84 FR 68550 (Dec. 16, 2019) 
(``Recordkeeping and Reporting Adopting Release'').
    \3\ Id. at 68571-88. See also 17 CFR 240.18a-7. The amendments 
to Part II included consolidating other FOCUS Report parts into Part 
II. See Recordkeeping and Reporting Adopting Release, 84 FR at 
68573-74 (discussing the consolidation of Parts IIB and IICSE into 
Part II).
    \4\ SBS Entities that also are registered as broker-dealers 
(other than OTC derivatives dealers) are subject to the FOCUS Report 
filing requirements of Exchange Act rule 17a-5. 17 CFR 240.17a-5(a).
    \5\ See 17 CFR 240.18a-7(a)(1) and (2).
    \6\ See 17 CFR 240.18a-7(a).
    \7\ See 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. 34-88866 (May 14, 2020).
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    Exchange Act rule 3a71-6 (``Rule 3a71-6'') conditionally provides 
that SBS Entities that are not U.S. persons may satisfy certain 
requirements under Exchange Act section 15F, including Rule 18a-7, by 
complying with comparable regulatory requirements of the SBS Entity's 
home jurisdiction.\8\ Pursuant to Rule 3a71-6, the Commission has 
issued orders granting conditional substituted compliance with respect 
to certain requirements applicable to SBS Entities subject to 
regulation in France, Germany, and the United Kingdom (``substituted 
compliance orders'').\9\ The substituted compliance orders permit 
certain SBS Entities in those jurisdictions (``Covered Entities'') to 
apply substituted compliance for specified Exchange Act requirements.
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    \8\ See 17 CFR 240.3a71-6.
    \9\ See Order Granting Conditional Substituted Compliance in 
Connection with Certain Requirements Applicable to Non-U.S. 
Security-Based Swap Dealers and Major Security-Based Swap 
Participants Subject to Regulation in the Federal Republic of 
Germany, Exchange Act Release No. 90765 (Dec. 22, 2020), 85 FR 85686 
(Dec. 29, 2020); Order Granting Conditional Substituted Compliance 
in Connection with Certain Requirements Applicable to Non-U.S. 
Security-Based Swap Dealers and Major Security-Based Swap 
Participants Subject to Regulation in the French Republic, Exchange 
Act Release No. 92484 (July 23, 2021), 86 FR 41612 (Aug. 2, 2021); 
Order Granting Conditional Substituted Compliance in Connection with 
Certain Requirements Applicable to Non-U.S. Security-Based Swap 
Dealers and Major Security-Based Swap Participants Subject to 
Regulation in the United Kingdom, Exchange Release No. 92529 (June 
30, 2021), 86 FR 43318 (Aug. 6, 2021); Order Granting Conditional 
Substituted Compliance in Connection With Certain Requirements 
Applicable to Non-U.S. Security-Based Swap Dealers Subject to 
Regulation in the Swiss Confederation, Exchange Act Release No. 
93284 (Oct. 8, 2021).
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    The substituted compliance orders permit a Covered Entity to 
satisfy the requirements of Rule 18a-7 with respect to filing Part II 
or Part IIC of the FOCUS Report by being subject to and complying with 
specified requirements in the Covered Entity's home jurisdiction, 
subject to additional conditions designed to help ensure comparability 
of regulatory outcomes. In particular, the conditions for applying 
substituted compliance with respect to Rule 18a-7 are that the Covered 
Entity: (1) Is subject to and complies with the relevant comparable 
requirements of the home jurisdiction; (2) files periodic unaudited 
financial and operational information with the Commission or its 
designee in the manner and format required by Commission rule or order 
and presents the financial information in the filing in accordance with 
generally accepted accounting principles (``GAAP'') that the Covered 
Entity uses to prepare general purpose publicly available or available 
to be issued financial statements in the home jurisdiction (``manner 
and format condition''); (3) applies substituted compliance for the 
capital requirements of Exchange Act rules 18a-1 through 18a-1d 
(collectively, ``Rule 18a-1'') if the Covered Entity does not have a 
prudential regulator; \10\ and (4) applies substituted compliance for 
the record preservation requirements of Exchange Act rule 18a-
6(b)(1)(viii) (``Rule 18a-6(b)(1)(viii)'') if the Covered Entity does 
not have a prudential regulator.\11\
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    \10\ See 17 CFR 240.18a-1 through 18a-1d.
    \11\ See 17 CFR 240.18a-6(b)(1)(viii). Rule 18a-6(b)(1)(viii) 
requires SBS Entities without a prudential regulator to preserve 
specified information in support of amounts included in the FOCUS 
Report Part II prepared as of the audit date. Id.
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    This order specifies how a Covered Entity must meet the manner and 
format condition in a substituted compliance order.\12\ Finally, in 
response to the Commission's proposed substituted compliance orders 
with respect to Germany, France, and the United Kingdom, commenters 
made suggestions about the manner and

[[Page 59209]]

format condition.\13\ The comments, and the Commission's response to 
them, are discussed below.
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    \12\ This order applies to the manner and format condition in 
the existing substituted compliance orders and to any future orders 
that include the manner and format condition. If necessary to 
achieve comparable regulatory outcomes, the Commission may prescribe 
additional conditions in a future substituted compliance order with 
respect to a particular jurisdiction to tailor a Covered Entity's 
reliance on the manner and format condition to the relevant laws in 
the jurisdiction.
    \13\ The comments are available at: https://www.sec.gov/comments/s7-16-20/s71620.htm (Germany); https://www.sec.gov/comments/s7-22-20/s72220.htm (France); and https://www.sec.gov/comments/s7-04-21/s70421.htm (United Kingdom).
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II. Discussion

A. Manner of Filing

i. Use Part II or IIC of the FOCUS Report and the eFOCUS System 
Administered by FINRA
    Most broker-dealers registered with the Commission currently file 
the applicable part of the FOCUS Report with FINRA through the eFOCUS 
system (``FINRA eFOCUS system''). As noted above, the Commission has 
designated FINRA to receive Part II and Part IIC of the FOCUS Report 
filed by SBS Entities pursuant to Rule 18a-7, including SBS Entities 
that are not broker-dealer members of FINRA. FINRA will administer a 
separate eFOCUS system to be used by SBS Entities that are not broker-
dealer members of FINRA to file the FOCUS Report Part II and Part IIC 
(as applicable) (``SEC eFOCUS system''). Under this order, a Covered 
Entity must file the financial and operational information in the 
format discussed below with the Commission through the SEC eFOCUS 
system administered by FINRA.\14\ The SEC eFOCUS system is modelled 
closely on the FINRA eFOCUS system. Using the SEC eFOCUS system will 
enable Covered Entities applying substituted compliance with respect to 
Rule 18a-7 to file the FOCUS Report Part II and Part IIC (as 
applicable) on the same platform and to use the same preexisting 
templates, software, and procedures as SBS Entities that are not 
members of FINRA. Further, the Commission staff will have access to the 
SEC eFOCUS system and the FINRA eFOCUS system (collectively, the 
``eFOCUS systems'') and information filed on those systems will be 
provided to the Commission staff to maintain a separate database. The 
staff will use its access to the eFOCUS systems and the database to 
monitor the financial condition of firms and to perform cross-firm 
analysis to identify trends and areas meriting further regulatory focus 
as well as to perform economic analyses. Requiring Covered Entities to 
use the SEC eFOCUS system to file the required financial and 
operational information will facilitate integrating the information 
with the financial and operational information of broker-dealers (some 
of which will be registered as security-based swap dealers) and SBS 
Entities that are not applying substituted compliance with respect to 
Rule 18a-7. This will enhance the Commission's ability to monitor and 
supervise these firms.
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    \14\ See paragraph (a) of the ordering language below. Covered 
Entities may file the FOCUS Reports Part II and Part IIC (as 
applicable) pursuant to instructions on the Commission's website if 
the SEC eFOCUS system is not ready to receive them by the required 
first filing deadline and, thereafter, until the SEC eFOCUS system 
is ready to receive the FOCUS Reports.
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ii. Frequency and Timing of Filing
    Rule 18a-7 requires an SBS Entity that is not prudentially 
regulated to file Part II of the FOCUS Report seventeen business days 
after the month end and an SBS Entity that is prudentially regulated to 
file Part IIC of the FOCUS Report thirty calendar days after the 
quarter end.\15\ In response to proposed substituted compliance orders, 
the Commission received comments requesting that Covered Entities be 
permitted to file their financial and operational information with the 
same frequency that they file financial reports in their home 
jurisdictions (typically quarterly).\16\ A commenter further requested 
that the deadline for filing the financial and operational information 
with the Commission be extended to 14 calendar days after the filing in 
their home jurisdiction is due, except the commenter requested 30 
calendar days in the case of a filing that covers a period ending on 
the firm's fiscal year end.\17\
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    \15\ See 17 CFR 240.18a-7(a)(1) and (2).
    \16\ See, e.g., Letter from Kyle Brandon, Managing Director, 
Head of Derivative Policy, SIFMA (Dec. 8, 2020) (``SIFMA Letter re: 
Proposed Order (Germany)'') at 8; Letter from Jan Ford, Head of 
Compliance, Americas and Co-Head of SBS Council, Deutsche Bank, and 
Gary Kane, Co-Head Institutional Client Group, Americas and Co-Head 
of SBS Council, Deutsche Bank (Dec. 8, 2020) (``Deutsche Bank Letter 
re: Proposed Order (Germany)'') at 2; Letter from Kyle Brandon, 
Managing Director, Head of Derivative Policy, SIFMA (Jan. 25, 2021) 
(``SIFMA Letter re: Proposed Order (France)'') at 16; Letter from 
Kyle L. Brandon, Managing Director, Head of Derivatives Policy, 
SIFMA (May 3, 2021) (``SIFMA Letter re: Proposed Order (UK)'') at 
Appendix B.
    \17\ SIFMA Letter re: Proposed Order (UK) at Appendix B.
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    The commenter's requests would substantially delay (in some cases 
by multiple months) the reporting of financial and operational 
information by Covered Entities. Consequently, for the reasons 
discussed below, the Commission does not believe it would be 
appropriate to permit the extended timeframes for reporting this 
information requested by the commenter. The Commission--when amending 
Rule 3a71-6 to make substituted compliance available for Rule 18a-7--
explained the importance of reporting.\18\ In particular, the reporting 
requirements are integral to the ability of the Commission to 
effectively examine and inspect regulated firms' compliance with 
applicable securities laws.\19\ Further, the reports are used to 
determine which firms are engaged in various securities-related 
activities, and how economic events and government policies may affect 
segments of the securities industry.\20\ In addition, the reports are 
important for protecting customers against the risks involved in having 
their securities held by a third party.\21\ Finally, the reporting 
requirements promote transparency of the financial and operational 
condition of firms registered with the Commission.\22\ In light of 
these considerations, Rule 3a71-6 states, in pertinent part, that prior 
to making a substituted compliance determination regarding SBS Entity 
reporting requirements, the Commission intends to consider (in addition 
to any conditions imposed) whether the foreign financial regulatory 
system's required reports, the timeframes for reporting information, 
the accounting standards governing the reports, and the required format 
of the reports are comparable to applicable provisions arising under 
the Exchange Act and its rules and regulations and would permit the 
Commission to examine and inspect regulated firms' compliance with 
applicable securities laws.\23\
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    \18\ See Recordkeeping and Reporting Adopting Release, 84 FR at 
68598.
    \19\ Id.
    \20\ Id.
    \21\ Id.
    \22\ Id.
    \23\ See 17 CFR 240.3a71-6; Recordkeeping and Reporting Adopting 
Release, 84 FR at 68598.
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    Rule 18a-7 requires SBS Entities without a prudential regulator to 
file the FOCUS Report Part II on a monthly basis 17 business days after 
the end of the month. As stated above, the commenter requests that 
Covered Entities without a prudential regulator be permitted to file 
the financial and operational information on a quarterly basis (if that 
is the filing frequency in their home jurisdiction) and 14 or 30 days 
after the deadlines for filing information in their home jurisdiction. 
Permitting quarterly filing and tying the deadline to local 
requirements would significantly delay the Commission's receipt of the 
financial and operational information and result in the filing of 
information that is multiple months old. Therefore, for the reasons 
discussed above, the Commission does not believe it would be 
appropriate to permit the timeframes requested by the commenter.

[[Page 59210]]

However, the Commission does believe it would be appropriate to permit 
the filing deadline to be 35 calendar days after the month end. This 
would align with the 35-day filing deadline for Covered Entities with a 
prudential regulator (discussed below).
    Rule 18a-7 requires SBS Entities with a prudential regulator to 
file the FOCUS Report Part IIC 30 calendar days after the end of the 
quarter. The commenter requests that Covered Entities with a prudential 
regulator be permitted to file the financial and operational 
information 14 or 30 days after the deadlines for filing information in 
their home jurisdiction. As discussed above, tying the deadline to 
local requirements would significantly delay the Commission's receipt 
of the financial and operational information and result in the filing 
of information that is several months old. Therefore, for the reasons 
discussed above, the Commission does not believe it would be 
appropriate to permit the timeframes requested by the commenter. 
However, the Commission believes it would be appropriate to permit the 
filing deadline to be 35 days after the quarter end. The Commission 
understands that the U.S. prudential regulators permit certain U.S. 
banks to file their financial reports 35 days after the quarter end. 
The Commission does not believe this modest increase in the number of 
days Covered Entities have to file the FOCUS Report Part II or Part IIC 
would implicate the concerns discussed above about receiving stale 
information.
    Under the order, a Covered Entity without a prudential regulatory 
must file the FOCUS Report Part II 35 calendar days after the end of 
the month.\24\ A Covered Entity with a prudential regulator must file 
the FOCUS Report Part IIC 35 calendar days after the end of the 
quarter. \25\
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    \24\ See paragraph (a)(1) of the ordering language below.
    \25\ See paragraph (a)(2) of the ordering language below.
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B. Format of Filing

i. Complete a Specified Set of Line Items on the FOCUS Report
    Part II and Part IIC of the FOCUS Report elicit financial and 
operational information about the filer through sections consisting of 
uniquely numbered line items. The information (e.g., a number or dollar 
amount) is entered into the line items. Under Rule 18a-7, an SBS Entity 
must use Part II or Part IIC of the FOCUS Report to submit required 
financial and operational information by filling out all applicable 
line items on the form. Commenters requested that Covered Entities be 
allowed to file other reports instead of or in combination with 
extracts from filings made with home country supervisors in lieu of 
filing the information elicited in Part II or Part IIC of the FOCUS 
Report.\26\
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    \26\ See SIFMA Letter re: Proposed Order (Germany) at 8; 
Deutsche Bank Letter re: Proposed Order (Germany) at 2; SIFMA Letter 
re: Proposed Order (France) at 15.
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    As discussed above, the Commission's ability to monitor and 
supervise SBS Entities will be facilitated by having all firms file 
periodic unaudited financial and operational information through the 
eFOCUS systems. The eFOCUS systems are configured to receive 
information formatted to Part II and Part IIC of the FOCUS Report and 
the line items contained on the forms. Consequently, information 
formatted to other types of report templates or free-form information 
cannot be input into the systems. Moreover, having all firms enter 
information in the uniquely numbered line items on Part II or Part IIC 
of the FOCUS Report will facilitate cross firm comparisons. If firms 
use different forms or report information without using the template of 
a common form, the Commission staff would need to manually merge the 
data, and even then, there would be omissions when the other form does 
not have a parallel line item.
    However, the Commission sought comment in the proposed substituted 
compliance orders for Germany, France, and the United Kingdom on 
whether it would be appropriate initially for Covered Entities to 
report information elicited by a limited subset of the applicable line 
items on Part II and Part IIC of the FOCUS Report rather than all 
applicable line items. Commenters supported this approach and a 
commenter indicated the line items on the two forms that Covered 
Entities could complete with information that they report pursuant to 
other requirements.\27\ The Commission believes it would be appropriate 
initially to limit the line items that Covered Entities complete on 
Part II or Part IIC of the FOCUS Report (as applicable) to information 
they draw from other reports or otherwise produce. This will allow them 
to use existing systems and processes for calculating and producing the 
information reported on the FOCUS Report Part II or Part IIC (as 
applicable), while still producing information that will facilitate the 
Commission's effective oversight of these entities. During this initial 
period, the Commission will evaluate whether it would be appropriate to 
require additional information to be reported by these filers in order 
to achieve a comparable regulatory outcome to the FOCUS Report filing 
requirements of Rule 18a-7. For these reasons, the order requires 
Covered Entities to complete a limited set of applicable line items on 
Part II or Part IIC of the FOCUS Report (as applicable).\28\
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    \27\ See, e.g., SIFMA Letter re: Proposed Order (UK) at Appendix 
B.
    \28\ See paragraph (b) of the ordering language below. The 
minimum required line items are highlighted on Part II of the FOCUS 
Report attached as Appendix A (if not prudentially regulated) or 
Part IIC of the FOCUS Report attached as Appendix B (if prudentially 
regulated). An SBS Entity may report information elicited in other 
line items on the applicable FOCUS Report if it chooses to do so. 
Further, as is the case with SBS Entities, Covered Entities must 
complete required line items if applicable. For example, under this 
order, Covered Entities will need to complete line items linked to 
Exchange rule 18a-4 (``Rule 18a-4''). 17 CFR 240.18a-4. However, the 
Commission expects most, if not all, Covered Entities will operate 
under an exemption to the segregation requirements of Rule 18a-4. 
Almost all the line items linked to Rule 18a-4 apply if the Covered 
Entity is not operating under the exemption. Therefore, a Covered 
Entity operating under the exemption need not complete these line 
items (there is a line item to indicate the firm is operating under 
the exemption, which will need to be completed if applicable).
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ii. Report Information On A Consolidated or Unconsolidated Basis
    A commenter requested that Covered Entities be permitted to present 
the financial and operational information in the filings at the entity-
level of the Covered Entity on either a consolidated or unconsolidated 
basis depending on the reporting basis the Covered Entity uses in its 
home jurisdiction.\29\ The Commission believes it would be appropriate 
for the purposes of this order to permit Covered Entities to present 
the information in Part II or Part IIC of the FOCUS Report (as 
applicable) at the entity level of the Covered Entity on the same basis 
(consolidated or unconsolidated) that the Covered Entity presents 
information in the financial reports it files in its home 
jurisdiction.\30\ This will avoid Covered Entities having to prepare 
two sets of financial statements: One for their home jurisdiction and 
one for the purposes of this order, while still producing information 
that will facilitate the Commission's effective oversight of these 
entities.
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    \29\ See SIFMA Letter re: Proposed Order (UK) at Appendix B.
    \30\ See paragraph (c) of the ordering language below.
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iii. Covered Entities Without a Prudential Regulator Must Complete the 
Regulatory Capital Section of Part IIC of the FOCUS Report
    The Commission has issued substituted compliance orders that

[[Page 59211]]

permit Covered Entities to apply substituted compliance with respect to 
the capital requirements of Rule 18a-1 applicable to Covered Entities 
without a prudential regulator subject to certain conditions. One of 
the conditions is that the Covered Entity is subject to and complies 
with specified capital requirements in the firm's home jurisdiction. 
The capital requirements in the home jurisdictions addressed in the 
substituted compliance orders are based on the international capital 
standard for banks (``Basel capital standard'').\31\ Part IIC of the 
FOCUS Report--because it is used by prudentially regulated SBS 
Entities--includes a section to report the firm's capital computation 
under the Basel capital standard. Conversely, Part II of the FOCUS 
Report includes sections to report capital computations under Exchange 
Act rule 15c3-1 \32\ and Rule 18a-1. It does not contain a section to 
report a capital computation under the Basel capital standard. 
Moreover, as discussed above, substituted compliance with Rule 18a-7 is 
conditioned on a Covered Entity without a prudential regulator applying 
substituted compliance with respect to Rule 18a-1.
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    \31\ See, e.g., BCBS, The Basel Framework, available at: https://www.bis.org/basel_framework/.
    \32\ 17 CFR 240.15c3-1.
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    For these reasons, the order provides that Covered Entities without 
a prudential regulator must complete the Regulatory Capital section 
from Part IIC of the FOCUS Report, rather than completing the 
Computation of Net Capital and Computation of Minimum Regulatory 
Capital Requirements sections from Part II of the FOCUS Report.\33\ 
Because Part II of the FOCUS Report does not include a section to 
calculate capital under the Basel capital standard, the version of that 
form attached to this order has been modified to include the capital 
calculation section from Part IIC of the FOCUS Report.
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    \33\ See paragraph (d) of the ordering language below. 
Initially, Covered Entities without a prudential regulator will need 
to file the FOCUS Report Part II and the FOCUS Report Part IIC (with 
only the Regulatory Capital section completed in the FOCUS Report 
Part IIC). Eventually, the SEC eFOCUS may be configured so that 
Covered Entities using Part II of the FOCUS Report to meet the 
manner and format condition will be able to report a capital 
calculation under the Basel capital standard using the relevant 
section from the FOCUS Report Part IIC without having to separately 
file the FOCUS Report Part IIC.
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iv. Report Basel Capital Standard Calculation Pursuant to Home Country 
Requirements
    A commenter requested that the Commission permit a Covered Entity 
to complete the capital line items in the filings, if the FOCUS Report 
Part IIC is used as the filing form, in a manner consistent with its 
home jurisdiction's capital standards and related reporting 
requirements.\34\ The Commission believes this accommodation to local 
reporting requirements would be appropriate for Covered Entities with a 
prudential regulator and for Covered Entities without a prudential 
regulator applying substituted compliance for the capital requirements 
of Rule 18a-1. This will avoid these firms having to perform and 
present two Basel capital calculations (one pursuant to local 
requirements and one pursuant to U.S. requirements). Moreover, the 
Basel capital standard is an international standard that has been 
adopted in the U.S. and in jurisdictions where substituted compliance 
is available for capital. Therefore, requirements for how firms 
calculate capital pursuant to the Basel capital standard generally 
should be similar. Consequently, even though the capital section of 
Part IIC of the FOCUS Report requires SBS Entities to complete the 
Regulatory Capital section using the instructions accompanying form 
FFIEC 031 (``Call Report''), Covered Entities completing the capital 
section of Part IIC of the FOCUS Report pursuant to this order may rely 
on local requirements to present the information on this section of the 
FOCUS Report.\35\
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    \34\ See SIFMA Letter re: Proposed Order (Germany) at 8; SIFMA 
Letter re: Proposed Order (France) at 15.
    \35\ See paragraph (d) of the ordering language below.
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v. Report GAAP Used In Memo Field to the FOCUS Report
    As discussed above, the manner and format condition in the 
Commission's substituted compliance orders requires Covered Entities to 
file periodic unaudited financial and operational information with the 
Commission or its designee in the manner and format required by 
Commission rule or order and present the financial information in the 
filing in accordance with GAAP that the Covered Entity uses to prepare 
general purpose publicly available or available to be issued financial 
statements in the home jurisdiction. Under this order, the Covered 
Entity must notify the Commission in a memorandum field accompanying 
the FOCUS Report the GAAP it uses to present the financial information 
in the filing.\36\ This will allow the Commission to better understand 
the information presented in the FOCUS Report and how it may differ 
from information reported by SBS Entities pursuant to U.S. GAAP.
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    \36\ See paragraph (e) of the ordering language below. In 
particular, the Covered Entity will need to report this information 
in the memorandum field for line item 12003 or 12004 (as applicable) 
of the FOCUS Report Part II if not prudentially regulated or line 
item 12758 or 12759 (as applicable) of the FOCUS Report Part IIC if 
prudentially regulated. Covered Entities may include this GAAP 
notice with the FOCUS Reports Part II and Part IIC (as applicable) 
filed pursuant to instructions on the Commission's website if the 
SEC eFOCUS system is not ready to receive them by the required first 
filing deadline and, thereafter, until the SEC eFOCUS system is 
ready to receive the FOCUS Reports.
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vii. Follow FOCUS Report Instructions Unless Inconsistent With This 
Order
    Finally, the Covered Entity must follow the instructions for 
completing the FOCUS Report Part II or Part IIC, as applicable, to the 
extent the instructions are not inconsistent with the provisions of the 
order.\37\ This includes presenting information in U.S. dollars (not in 
local currencies).\38\ However, a prudentially regulated Covered Entity 
filing the FOCUS Report Part IIC need not follow instructions referring 
to line items on the Call Report to the extent the Covered Entity does 
not report the required information in a Call Report pursuant to that 
instruction.\39\
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    \37\ See paragraph (f) of the ordering language below.
    \38\ Covered Entities may convert local currencies at a ``top-
line'' level to U.S. dollars at the spot rate applicable on the ``as 
of'' date of the reported amount.
    \39\ If the Covered Entity files a Call Report in the U.S. with 
a prudential regulator pursuant to the instructions for the Call 
Report, it should follow the instructions in the FOCUS Report Part 
IIC to report information in that report to the extent the same 
information is reported by the Covered Entity in the Call Report.
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III. Conclusion

    It is hereby ordered that a Covered Entity must meet the manner and 
format condition in a Commission order granting conditional substituted 
compliance with respect Exchange Act rule 18a-7 by:
    (a)(1) If not prudentially regulated, filing through the SEC eFOCUS 
system a FOCUS Report Part II 35 calendar days after the end of each 
month; or
    (2) If prudentially regulated, filing through the SEC eFOCUS system 
the FOCUS Report Part IIC 35 calendar days after the end of each 
quarter;
    (b)(1) If not prudentially regulated, entering the required 
information on the line items (as applicable) highlighted on the FOCUS 
Report Part II attached as Appendix A to this order on the FOCUS Report 
Part II filed pursuant to paragraph (a)(1) above; or
    (2) If prudentially regulated, entering the required information on 
the line items (as applicable) highlighted on the FOCUS Report Part IIC 
attached as Appendix B to this order on the FOCUS

[[Page 59212]]

Report Part IIC filed pursuant to paragraph (a)(2) above;
    (c) Presenting the information in the FOCUS Report Part II or Part 
IIC (as applicable) filed pursuant to paragraph (a) above at the entity 
level of the Covered Entity on the same basis (consolidated or 
unconsolidated) that the Covered Entity presents information in the 
financial reports it files in its home jurisdiction;
    (d) Completing the Regulatory Capital section of the FOCUS Report 
Part IIC and presenting the information in that section in accordance 
with the reporting requirements of the Covered Entity's home 
jurisdiction;
    (e) Identifying the generally accepted accounting principles being 
used to present the information in the FOCUS Report Part II or Part IIC 
(as applicable) filed pursuant to paragraph (a) above in the memo field 
for line item 12003, 12004, 12758, or 12759 (as applicable) of the 
report in the SEC eFOCUS system; and
    (f) Reporting the information in the FOCUS Report Part II or Part 
IIC (as applicable) filed pursuant to paragraph (a) above in accordance 
with the instructions for those reports; except that the Covered Entity 
can report the information:
    (1) In a manner consistent with a condition of this order, if the 
instruction conflicts with the condition; or
    (2) In a manner consistent with the requirements of its home 
jurisdiction, if the instruction on the FOCUS Report Part IIC requires 
information submitted on the Call Report and the Covered Entity does 
not report the required information on a Call Report.

    By the Commission.

    Dated: October 14, 2021.
Eduardo A. Aleman,
Deputy Secretary.
BILLING CODE 8011-01-P

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[FR Doc. 2021-22817 Filed 10-25-21; 8:45 am]
BILLING CODE 8011-01-C