For these reasons, the Commission is adopting the manner of
notification requirements with the modification discussed above and
with the modification that an OTCDD/SBSD will be subject to these
requirements pursuant to Rule 18a-7 (rather than Rule 17a-5).
3. Additional Amendments to Rule 17a-11 and Modifications to Rule 18a-
8.
    The Commission proposed several amendments to Rule 17a-11 to
eliminate obsolete text, improve readability, and modernize
terminology. The Commission proposed a global change to Rule 17a-11
that replaced the use of the word ``shall'' in the rule with the word
``must'' or ``will'' where appropriate.\466\ The Commission also
proposed certain stylistic, corrective, and punctuation amendments to
improve the readability of Rule 17a-11.\467\ The Commission received no
comment on these amendments and is adopting them as proposed.
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    \466\ The amendments would replace the word ``shall'' with the
word ``must'' or ``will'' in the following paragraphs of Rule 17a-
11, as proposed to be amended: (a)(1) and (2), (b), (c), (g), (h),
and (j). See Rule 17a-11, as proposed to be amended.
    \467\ The Commission proposed the following stylistic and
corrective changes to Rule 17a-11: (1) Replacing the phrase ``this
Sec.  240.17a-11'' with the phrase ``this section'' in paragraph
(a)(1); (2) replacing the phrase ``Every broker or dealer who'' with
the phrase ``Every broker or dealer that'' in paragraph (c); (3)
replacing the phrase ``such discovery or notification of the
material inadequacy or the material weakness'' with the phrase ``the
discovery or notification of the material inadequacy or material
weakness'' in paragraph (d)(1); and (4) removing the U.S.C.
citations from paragraph (j) since the rule already cites to the
applicable section of the Exchange Act.
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    As a consequence of the deletion of paragraph (a), paragraphs (b)
through (e) of Rule 17a-11 were redesignated paragraphs (a) through
(d), respectively. Further, the Commission is adding two new
notification provisions to Rule 17a-11 that are codified in paragraphs
(e) and (f) of the rule, as amended. As a consequence of the deletion
of paragraph (a) and the addition of the two new provisions, paragraphs
(f) through (i) were redesignated paragraphs (g) through (j),
respectively. Similarly, due to the addition and deletion of various
paragraphs, the Commission made a global change that replaced the
cross-references to ``paragraph (g)'' of Rule 17a-11 with ``paragraph
(h)'' of Rule 17a-11.\468\ The Commission received no comment on these
revisions and is adopting them as proposed.
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    \468\ The amendments replace the phrase ``paragraph (g)'' with
the phrase ``paragraph (h)'' in the following paragraphs of Rule
17a-11, as amended: (a)(1), (b), (c), (d)(1) and (2), and (g). See
Rule 17a-11, as amended.
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    Prior to these amendments, paragraph (f) of Rule 17a-11 made
reference to a ``member'' of a national securities exchange as a
distinct class of registrant in addition to a ``broker'' and
``dealer.'' The Commission proposed to remove this reference to a
``member'' given that the rule applies to broker-dealers, which would
include a member of a national securities exchange that is a broker-
dealer (and as discussed above, proposed to redesignate paragraph (f)
as paragraph (g)).\469\ The Commission received no comment on this
revision and is adopting it as proposed.
---------------------------------------------------------------------------

    \469\ See paragraph (g) of Rule 17a-11, as proposed to be
amended.
---------------------------------------------------------------------------

    Prior to these amendments, paragraph (f) of Rule 17a-11 contained a
reference to the notices required under ``paragraphs (b), (c), (d), or
(e)'' of Rule 17a-11. The Commission proposed to replace the quoted
language with a reference to ``this section'' (and as discussed above,
proposed to redesignate paragraph (f) as paragraph (g)).\470\ The
proposed change incorporated all the notices required under Rule 17a-
11, including notices that are required under the new security-based
swap customer reserve account notification requirement. The Commission
received no comment on this revision and is adopting it as
proposed.\471\
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    \470\ See paragraph (g) of Rule 17a-11, as proposed to be
amended.
    \471\ See paragraph (g) of Rule 17a-11, as amended.
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    Finally, prior to these amendments, paragraph (h) contained
references to ``Sec.  240.15c3 1(a)(6)(iv)(B), Sec.  240.15c3
1(a)(6)(v), Sec.  240.15c3 1(a)(7)(ii), Sec.  240.15c3
1(c)(2)(x)(B)(1), Sec.  240.15c3 1(e), Sec.  240.15c3 1d(c)(2), Sec.
240.15c3 3(i), Sec.  240.17a 5(h)(2), and Sec.  240.17a 12(f)(2).'' The
Commission proposed amending the references to state, ``Sec.  240.15c3-
1, Sec.  240.15c3-1d, Sec.  240.15c3-3, Sec.  240.17a-5, and Sec.
240.17a-12.'' \472\ This amendment corrected certain cross-references
that are outdated due to the recently adopted amendments to some of
these rules.\473\ It also eliminated cross-references to specific
paragraphs in the event of future amendments to these cross-referenced
rules. The Commission received no comment on this amendment and is
adopting it as proposed.\474\
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    \472\ See paragraph (i) of Rule 17a-11, as proposed to be
amended.
    \473\ See Broker-Dealer Reports, 78 FR 51910; Financial
Responsibility Rules for Broker-Dealers, 78 FR 51824.
    \474\ See paragraph (i) of Rule 17a-11, as amended.
---------------------------------------------------------------------------

    The Commission also made certain non-substantive modifications to
Rule 18a-8.\475\
---------------------------------------------------------------------------

    \475\ The non-substantive modifications to Rule 18a-8, as
adopted, are: (1) Adding ``of such deficiency'' after the phrase
``must give notice'' in paragraph (a)(1)(i) and (ii) and (a)(2) for
consistency with paragraph (a)(1) of Rule 17a-11, as amended; (2)
removing ``as appropriate'' after the phrase ``its current amount of
tentative net capital'' in paragraph (a)(1)(ii) for clarity; (3)
adding a ``,'' after the phrase ``with paragraph (h) of this
section'' in paragraph (e)(2) for consistency with paragraph (d)(2)
of Rule 17a-11, as amended; and (4) adding ``for which there is no
prudential regulator'' after the phrase ``If a security-based swap
dealer'' in paragraph (g) for clarity.

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D. Quarterly Securities Count and Capital Charge for Unresolved
Securities Differences

1. Introduction
    The Commission proposed a securities count program for stand-alone
SBSDs under Section 15F of the Exchange Act that is modeled on the
securities count program for broker-dealers codified in Rule 17a-
13.\476\ Rule 17a-13 requires certain broker-dealers (generally,
broker-dealers that hold customer funds and securities) to examine and
count the securities they physically hold, account for the securities
that are subject to their control or direction but are not in their
physical possession, verify the locations of securities under certain
circumstances, and compare the results of the count and verification
with their records. Broker-dealer SBSDs, including OTCDD/SBSDs, and
broker-dealer MSBSPs will be subject to Rule 17a-13.\477\ Consequently,
they must comply with the existing securities count requirements in the
rule with respect to security-based swaps.
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    \476\ See Recordkeeping and Reporting Proposing Release, 79 FR
at 25252-54.
    \477\ The undesignated introductory paragraph to Rule 18a-9 has
been modified to clarify this application of the rules. The Dodd-
Frank Act amended the definition of ``security'' in Section 3(a)(10)
of the Exchange Act to include a security-based swap. Therefore,
each reference in Rule 17a-13 to a security in the Exchange Act
includes a security-based swap. The Commission, however, has issued
temporary exemptive relief excluding security-based swaps from the
definition of security to the extent Commission rules did not
otherwise apply specifically to security-based swaps prior to the
amendment. See section III.C. of this release.
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    Stand-alone SBSDs will be subject to Rule 18a-9, which is modeled
on Rule 17a-13. Rule 18a-9 does not include a parallel requirement for
every requirement in Rule 17a-13.\478\ In addition, Rule 18a-9 does not
apply to stand-alone MSBSPs because the customer protection rationale
for Rule 17a-13 and Rule 18a-9 is not as pertinent to stand-alone
MSBSPs. For example, the Commission does not anticipate that stand-
alone MSBSPs will engage in securities operations involving the
movement of funds and securities from buyer to seller that are as
complex as the operations of dealers in securities such as broker-
dealers and SBSDs.
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    \478\ The Commission is not including in Rule 18a-9, as adopted,
provisions that would parallel the provisions in paragraphs (a)(1),
(2), and (3) and (e) of Rule 17a-13. These paragraphs of Rule 17a-13
provide exemptions from complying with Rule 17a-13 for certain types
of broker-dealers. The Commission believes that SBSDs will not limit
their activities to the types of activities in which the exempt
broker-dealers engage.
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2. Rule 18a-9
Undesignated Introductory Paragraph
    The Commission proposed that Rule 18a-9 have an undesignated
introductory paragraph explaining that the rule applies only to a
stand-alone SBSD.\479\ The note further explained that a broker-dealer,
including a broker-dealer SBSD, is subject to the securities count
requirements under Rule 17a-13.\480\ The Commission received no
comments on this proposed introductory paragraph and is adopting it
with modifications to clarify which rule (17a-13 or 18a-9) applies to a
given type of entity.\481\
---------------------------------------------------------------------------

    \479\ See Recordkeeping and Reporting Proposing Release, 79 FR
at 25253.
    \480\ See id.
    \481\ See undesignated introductory paragraph of Rule 18a-9, as
adopted.
---------------------------------------------------------------------------

Requirement To Perform a Securities Count
    Paragraph (b) of Rule 17a-13 requires a quarterly securities count
and specifies the steps a broker-dealer must take in performing the
count. In general terms, the rule requires a broker-dealer to
physically examine, count, and verify all securities positions (e.g.,
equities, corporate bonds, and government securities, and, after the
Commission's exemptive relief expires,\482\ security-based swaps), and
to compare the results of the count and verification with the firm's
records at least once each calendar quarter. A securities count
difference results when the count reflects positions different than
those reflected in the firm's books and records.
---------------------------------------------------------------------------

    \482\ See section III.C. of this release.
---------------------------------------------------------------------------

    The Commission proposed parallel securities count requirements in
Rule 18a-9 that mirrored the requirements in paragraph (b) of Rule 17a-
13.\483\ Consequently, a stand-alone SBSD would be required to perform
a securities count each quarter following steps that are identical to
the steps specified in paragraph (b) of Rule 17a-13.\484\ Moreover, a
securities count needed to be performed no sooner than two months after
the last count and no later than four months after the last count.\485\
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    \483\ See Recordkeeping and Reporting Proposing Release, 79 FR
at 25253-54.
    \484\ See paragraph (a) of Rule 18a-9, as proposed to be
adopted.
    \485\ See id.
---------------------------------------------------------------------------

    Stand-alone SBSDs may have limited activities. The Commission
believes, however, that stand-alone SBSDs will likely hold securities
in a proprietary capacity and as hedges or collateral related to their
swaps activity, and therefore are susceptible to the same risks as
broker-dealers if securities are not counted and verified. This is the
same reason that OTC derivatives dealers are not exempt from performing
quarterly securities counts even though they also conduct a more
limited business than traditional broker-dealers.
    The Commission acknowledges that security-based swaps are not held
in depositories or at other types of custodians. Instead, they are
documented in contractual agreements. In order to meet the requirements
of Rules 17a-13 and 18a-9, as applicable, a broker-dealer and SBSD
generally will need to account for or verify its open security-based
swap transactions. The method of doing so could involve steps to
confirm open transactions reflected in the firm's books and records
with securities clearing agencies or counterparties. The Commission is
adopting this requirement as proposed.\486\
---------------------------------------------------------------------------

    \486\ See paragraph (a) of Rule 18a-9, as adopted.
---------------------------------------------------------------------------

Date of the Count
    Paragraph (c) of Rule 17a-13 provides that: (1) The examination,
count, verification, and comparison may be made either as of a date
certain or on a cyclical basis covering the entire list of securities;
(2) in either case the recordation of unresolved differences shall be
effected within seven business days subsequent to the examination,
count, verification, and comparison of a particular security; (3) in
the event that an examination, count, verification, and comparison is
made on a cyclical basis, it shall not extend over more than one
calendar quarter-year; and (4) no security shall be examined, counted,
verified, or compared for the purpose of the rule less than two months
or more than four months after a prior examination, count,
verification, and comparison. This permits a broker-dealer to perform
the securities count on a rolling basis throughout the quarter as
opposed to performing it all at once.\487\ The Commission proposed a
parallel securities count requirement in Rule 18a-8.\488\ Consequently,
a stand-alone SBSD could perform the securities count as of a date
certain or on a cyclical basis subject to conditions that

are identical to the conditions in paragraph (c) of Rule 17a-13. The
Commission received no comment on this provision and is adopting it as
proposed.\489\
---------------------------------------------------------------------------

    \487\ For example, on day one the broker-dealer could perform
the count with respect to securities of ABC Corporation, on day two
the broker-dealer could perform the count with respect to securities
of DEF Corporation, and on day three the broker-dealer could perform
the count with respect to securities of GHI Corporation.
    \488\ See Recordkeeping and Reporting Proposing Release, 79 FR
at 25254.
    \489\ See paragraph (b) of Rule 18a-9, as adopted.
---------------------------------------------------------------------------

Separation of Duties
    Paragraph (d) of Rule 17a-13 provides that the examination, count,
verification, and comparison shall be made or supervised by persons
whose regular duties do not require them to have direct responsibility
for the proper care and protection of the securities or the making or
preservation of the subject records. Thus, the rule requires a
separation of duties as a control to promote the integrity of the
securities count process. The Commission proposed a parallel separation
of duties requirement in Rule 18a-9 that mirrored the requirement in
paragraph (d) of Rule 17a-13.\490\ Consequently, a stand-alone SBSD was
required to assign responsibility for making or supervising the count
to individuals whose regular duties do not require them to have direct
responsibility for the proper care and protection of the securities or
the making or preservation of the subject records.\491\ The Commission
received no comment on this provision and is adopting it as
proposed.\492\
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    \490\ See Recordkeeping and Reporting Proposing Release, 79 FR
at 25254.
    \491\ See paragraph (c) of Rule 18a-9, as proposed to be
adopted.
    \492\ See paragraph (c) of Rule 18a-9, as adopted. Paragraph (d)
of Rule 18a-9, as proposed to be adopted, would have mirrored
paragraph (f) of Rule 17a-13, but the Commission is not adopting
that provision.
---------------------------------------------------------------------------

E. Alternative Compliance Mechanisms

    A commenter urged the Commission to harmonize its recordkeeping
requirements for SBSDs and MSBSPs with the CFTC's final recordkeeping
requirements for swap dealers and major swap participants to the
maximum extent possible with the goal of permitting firms to utilize a
single recordkeeping system for security-based swaps and swaps.\493\ In
response to the comment and to promote harmonization with CFTC
requirements, the Commission--as discussed below--is adopting a limited
alternative compliance mechanism in Rules 17a-3 and 18a-5 and amending
Rule 18a-10 to add recordkeeping and reporting requirements to the full
alternative compliance mechanism provided by that rule.\494\
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    \493\ See SIFMA 9/5/2014 Letter. See also Recordkeeping and
Reporting Proposing Release, 79 FR at 25198, 25209 (seeking comment
on whether there are provisions in the CFTC's recordkeeping and
reporting rules for swap dealers and major swap participants that
the Commission should consider with respect to the rules for SBSDs
and MSBSPs).
    \494\ See Capital, Margin, and Segregation Adopting Release, 84
FR at 43943-46 (adopting Rule 18a-10, which provides an alternative
compliance mechanism for certain SBSDs with respect to capital,
margin, and segregation requirements).
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1. Limited Alternative Compliance Mechanism--Rules 17a-3 and 18a-5
    Under the limited alternative compliance mechanism, an SBSD or
MSBSP may comply with the recordkeeping requirements of the CEA and the
rules thereunder applicable to swap dealers and major swap participants
in lieu of complying with the requirements in Rules 17a-3 and 18a-5 to
make and keep current trade blotters, customer account ledgers, and
stock records solely with respect to information required to be
included in these records regarding security-based swap transactions
and positions if the SBSD or MSBSP:
     is registered as an SBSD or MSBSP pursuant to Section 15F
of the Exchange Act;
     is registered as a swap dealer or major swap participant
pursuant to section 4s of the Commodity Exchange Act and the rules
thereunder;
     is subject to 17 CFR 23.201-202, 17 CFR 23.402, and 17 CFR
23.501 (the ``CFTC's Books and Records Rules'') with respect to its
swap-related books and records;
     preserves all of the data elements necessary to create the
records required by paragraphs (a)(1), (3), and (5) of Rule 17a-3;
paragraphs (a)(1), (3), and (4) of Rule 18a-5; or paragraphs (b)(1)
through (3) of Rule 18a-5, as applicable, as they pertain to security-
based swap and swap transactions and positions;
     upon request furnishes promptly to representatives of the
Commission the records required by paragraphs (a)(1), (3), and (5) of
Rule 17a-3; paragraphs (a)(1), (3), and (4) of Rule 18a-5; or
paragraphs (b)(1) through (3) of Rule 18a-5, as applicable, as they
pertain to security-based swap and swap transactions and positions, as
well as the records required by the CFTC's Books and Records Rules, as
they pertain to security-based swap and swap transactions and
positions, in the format applicable to that category of record as set
forth in Rule 17a-3 or Rule 18a-5, as applicable; and
     provides notice of its intent to utilize the limited
alternative compliance mechanism by notifying the Commission in
writing, both at the principal office of the Commission in Washington,
DC and at the regional office of the Commission for the region in which
the registrant has its principal place of business, and, if the
registrant is a broker-dealer, by notifying in writing the registrant's
DEA.\495\
---------------------------------------------------------------------------

    \495\ See paragraph (b) of Rule 17a-3, as amended, and paragraph
(c) of Rule 18a-5, as adopted.
---------------------------------------------------------------------------

    These records must be maintained for the retention period and in
the manner specified for that category of record in Rule 17a-4 or 18a-
6, as applicable.
    The first three prongs of the limited alternative compliance
mechanism identify the entities that may use it; that is, entities that
are registered with the Commission as an SBSD or MSBSP and with the
CFTC as a swap dealer or major swap participant and are subject to the
recordkeeping requirements of the CFTC with respect to its swap-related
books and records. The fourth and fifth prongs set forth the
substantive requirements of the limited alternative compliance
mechanism: (1) That the registrant preserve the data elements necessary
to create the relevant required records as they pertain to security-
based swap and swap transactions and positions, regardless of format;
and (2) that the registrant provide those data elements as they pertain
to security-based swap and swap transactions and positions in the
format required by Commission rules upon request by a representative of
the Commission. In effect, these two requirements taken together mean
that a firm will not be required to create a trade blotter, customer
account ledger, or stock record reflecting security-based swap
transactions and positions formatted pursuant to the Commission's rules
each day, but instead only when requested to do so by Commission staff.
This should promote harmonization with CFTC requirements because firms
will be able to create the daily records for both security-based swap
and swap transactions and positions in the format required by the CFTC.
For example, firms will not have to create on a daily basis two sets of
trade blotters for security-based swap and swap transactions and
positions: one in the Commission's required format and the other in the
CFTC's required format.
    The limited alternative compliance mechanism applies only to the
provisions of Rules 17a-3 and 18a-5 that were specifically referenced
by the commenter as appropriate for ``harmonization,'' \496\ with the
exception of the general ledger requirements in paragraph (a)(2) of
Rules 17a-3 and 18a-5. Consequently, the limited alternative compliance
mechanism may be applied to: (1) The trade blotter requirements in
paragraph (a)(1) of Rule 17a-3, as amended, and paragraphs

(a)(1) and (b)(1) of Rule 18a-5, as adopted; (2) the customer account
ledger requirements of paragraph (a)(3) of Rule 17a-3, as amended, and
paragraphs (a)(3) and (b)(2) of Rule 18a-5, as adopted; and (3) the
stock record requirements of paragraph (a)(5)(ii) of Rule 17a-3, as
amended, and paragraphs (a)(4) and (b)(3) of Rule 18a-5, as adopted.
The Commission does not believe it would be appropriate to apply the
limited alternative compliance mechanism to the general ledger
requirements in paragraph (a)(2) of Rules 17a-3 and 18a-5 because the
information that must be recorded in a general ledger is not limited to
security-based swap and swap information. In particular, the general
ledger must include information reflecting all assets and liabilities,
income and expense, and capital accounts in order to facilitate
examinations of the firm's overall financial condition and solvency.
The Commission believes that the substantive requirements of the
remaining provisions identified by the commenter as applied to
security-based swap and swap transactions and positions are
sufficiently similar to their counterparts in the CFTC's Books and
Records Rules to make use of the limited alternative compliance
mechanism appropriate. The Commission emphasizes that the limited
alternative compliance mechanism applies solely to the books and
records requirements with respect to security-based swap and swap
transactions and positions, and does not extend to any books and
records requirements for other types of transactions and positions. For
other types of transactions and positions, the SBSD or MSBSP must make
and keep current a trade blotter, customer account ledger, and stock
record in the format required by Rule 17a-3 or 18a-5 as applicable.
---------------------------------------------------------------------------

    \496\ See SIFMA 9/5/2014 Letter.
---------------------------------------------------------------------------

    The commenter seeking harmonization with the CFTC's requirements
also stated that the Commission should permit bank SBSDs and MSBSPs to
satisfy the Commission's recordkeeping requirements by complying with
recordkeeping rules established by their prudential regulator, stating
that ``[s]uch rules should be supplemented with additional requirements
only to the extent that such additional obligations are necessary for
the Commission to fulfill its regulatory oversight of bank SBSDs and
MSBSPs.'' \497\ Based largely on its consultations with the prudential
regulators regarding their recordkeeping and reporting requirements,
the Commission believes that the final amendments and rules being
adopted in this document achieve this objective by specifically
addressing a bank's activities as an SBSD or an MSBSP and only those
activities. In particular, the rules being adopted in this document for
bank SBSDs and MSBSPs are focused solely on documenting or requiring
the reporting of information relating to engaging in security-based
swap activities as opposed to the more traditional banking activities
addressed by prudential regulators' existing recordkeeping and
reporting requirements. In addition, as discussed above in section
II.B.2. of this release, the Commission is adopting a reporting form
for bank SBSDs and MSBSPs (the FOCUS Report Part IIC) that elicits
information that largely is drawn from the call reports banks must file
with the prudential regulators. In this way, the Commission has
harmonized its reporting requirements for bank SBSDs and MSBSPs with
the reporting requirements of the prudential regulators.
---------------------------------------------------------------------------

    \497\ See SIFMA 9/5/2014 Letter.
---------------------------------------------------------------------------

2. Full Alternative Compliance Mechanism--Rule 18a-10
    The Commission adopted the full alternative compliance mechanism in
Rule 18a-10.\498\ Rule 18a-10 permits certain SBSDs that are registered
as swap dealers and that predominantly engage in a swaps business to
elect to comply with the capital, margin, and segregation requirements
of the CEA and the CFTC's rules in lieu of complying with the capital,
margin, and segregation requirements of Rules 18a-1, 18a-3, and 18a-
4.\499\ The Commission is amending Rule 18a-10 in this document to
permit firms that will operate under Rule 18a-10 to elect to comply
with the recordkeeping and reporting requirements of the CEA and the
CFTC's rules in lieu of complying with Rules 18a-5, 18a-6, 18a-7, 18a-
8, and 18a-9.
---------------------------------------------------------------------------

    \498\ See Capital, Margin, and Segregation Adopting Release, 84
FR at 43943-46.
    \499\ The full alternative compliance mechanism of Rule 18a-10
is not available to a nonbank SBSD that is also registered as a
broker-dealer, including a broker-dealer that is an OTC derivatives
dealer. In theory, a bank SBSD could use the full alternative
compliance mechanism of Rule 18a-10 if it met the required
conditions. However, the Commission does not expect that these
entities would choose to do so. See Capital, Margin, and Segregation
Adopting Release, 84 FR at 43944 n. 707.
---------------------------------------------------------------------------

    Paragraph (a) of Rule 18a-10 sets forth the conditions that an SBSD
must meet to operate under the full alternative compliance mechanism.
The Commission is amending the preface of paragraph (a) to reference
recordkeeping and reporting requirements of the CEA and the CFTC's
rules as well as Rules 18a-5, 18a-6, 18a-7, 18a-8, and 18a-9 in order
to add these requirements to the full alternative compliance
mechanism.\500\ The conditions for operating under the full alternative
compliance mechanism are set forth in paragraphs (a)(1) through (5) of
Rule 18a-10. Paragraphs (a)(1) through (3) of Rule 18a-10 provide that
the firm must be registered with the Commission as an SBSD, must not be
registered with the Commission as a broker-dealer (including an OTC
derivatives dealer), and must be registered with the CFTC as a swap
dealer. Paragraph (a)(4) of Rule 18a-10 provides that the SBSD must be
exempt from the segregation requirements of Rule 18a-4. Paragraph
(a)(5) of Rule 18a-10 provides that the aggregate gross notional amount
of the firm's outstanding security-based swap positions must not exceed
the lesser of two thresholds as of the most recently ended quarter of
the firm's fiscal year.\501\ The thresholds are: (1) The maximum fixed-
dollar gross notional amount of open security-based swaps specified in
paragraph (f) of the rule (``maximum fixed-dollar threshold''); and (2)
10% of the combined aggregate gross notional amount of the firm's open
security-based swap and swap positions. The amount of the maximum
fixed-dollar threshold is $250 billion for a transitional period of
three years and will then drop to $50 billion unless the Commission, by
order: (1) Maintains the maximum fixed-dollar amount at $250 billion
for an additional period of time or indefinitely after the 3-year
transition period ends; or (2) lowers it to an amount that is less than
$250 billion but greater than $50 billion.\502\ Other than the
amendment to the preface of paragraph (a) discussed above, the
Commission is not amending the conditions set forth in paragraphs
(a)(1) through (5) of Rule 18a-10. In addition, the Commission is not
amending paragraph (f) of Rule 18a-10 (specifying the maximum fixed-
dollar threshold).
---------------------------------------------------------------------------

    \500\ As amended, the preface to paragraph (a) of Rule 18a-10
provides that a security-based swap dealer may comply with capital,
margin, segregation, recordkeeping, and reporting requirements of
the Commodity Exchange Act and chapter I of title 17 of the Code of
Federal Regulations applicable to swap dealers in lieu of complying
with Sec. Sec.  240.18a-1 and 240.18a-3 through 240.18a-9.
    \501\ The gross notional amount is based on the notional amounts
of the firm's security-based swaps and swaps that are outstanding as
of the quarter end. It is not based on transaction volume during the
quarter.
    \502\ See paragraphs (f)(1)(i) and (ii) of Rule 18a-10, as
adopted.
---------------------------------------------------------------------------

    Paragraph (b) of Rule 18a-10 sets forth requirements for a firm
that is

operating pursuant to the rule. Paragraph (b)(1) provides, in pertinent
part, that the firm must comply with the capital, margin, and
segregation requirements of the CEA and the CFTC's rules applicable to
swap dealers. The Commission is amending paragraph (b)(1) to reference
recordkeeping and reporting requirements of the CEA and the CFTC's
rules to add these requirements to this provision.\503\ Consequently, a
firm that is subject to Rule 18a-10 must comply with applicable
capital, margin, segregation, recordkeeping, and reporting requirements
of the CEA and the CFTC's rules and a failure to comply with one or
more of those rules will constitute a failure to comply with Rule 18a-
10.
---------------------------------------------------------------------------

    \503\ As amended, paragraph (b)(1) of Rule 18a-10 provides that
compliance with capital, margin, segregation, recordkeeping, and
reporting requirements of the Commodity Exchange Act and chapter I
of title 17 of the Code of Federal Regulations applicable to swap
dealers and treat security-based swaps or collateral related to
security-based swaps as swaps or collateral related to swaps, as
applicable, pursuant to those requirements to the extent the
requirements do not specifically address security-based swaps or
collateral related to security-based swaps.
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    Paragraph (b)(1) also provides, in pertinent part, that the firm
must treat security-based swaps and related collateral pursuant of the
CEA and the CFTC's rules to the extent the requirements do not
specifically address security-based swaps and related collateral. This
provision is designed to ensure that security-based swaps and related
collateral do not fall into a ``regulatory gap'' with respect to an
SBSD operating under the full alternative compliance mechanism. Under a
CFTC no-action letter, if a capital, margin, segregation,
recordkeeping, or reporting requirement applicable to a swap or
collateral related to a swap is silent as to a security-based swap or
collateral related to a security-based swap, the nonbank SBSD must
treat the security-based swap or collateral related to the security-
based swap pursuant to the requirement applicable to the swap or
collateral related to the swap.\504\
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    \504\ See, e.g., Letter from Eileen T. Flaherty, Director,
Division of Swap Dealer and Intermediary Oversight, and Jeffrey M.
Bandman, Acting Director, Division of Clearing and Risk, CFTC, to
Mary P. Johannes, Senior Director, ISDA (Aug. 23, 2016) (providing
no-action relief to swap dealers and major swap participants with
respect to the CFTC's margin rules for non-cleared swaps pursuant to
which these entities can portfolio margin non-cleared swaps with
non-cleared security-based swaps, provided, among other conditions,
the security-based swaps shall be treated as if they were swaps for
all applicable provisions of the CFTC's margin rules).
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    The Commission is making clarifying amendments to paragraph (b)(1)
of Rule 18a-10 to provide that the firm must treat a security-based
swap or collateral related to a security-based swap as a swap or
collateral related to a swap, as applicable, if the CEA or the CFTC's
rules do not specifically address a security-based swap or collateral
related to a security-based swap.\505\
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    \505\ The amendments adding the recordkeeping and reporting
requirements to paragraph (b)(1) and making the clarification
discussed above result in the paragraph providing that compliance
with capital, margin, segregation, recordkeeping, and reporting
requirements of the Commodity Exchange Act and chapter I of title 17
of the Code of Federal Regulations applicable to swap dealers and
treat security-based swaps or collateral related to security-based
swaps as swaps or collateral related to swaps, as applicable,
pursuant to those requirements to the extent the requirements do not
specifically address security-based swaps or collateral related to
security-based swaps.
---------------------------------------------------------------------------

    The amendments to Rule 18a-10 being adopted in this document will
require a firm operating under the rule to treat security-based swaps
and related collateral pursuant to the recordkeeping and reporting
requirements of the CEA and the CFTC's rules as if they were swaps or
related collateral to the extent those requirements do not specifically
address security-based swaps and related collateral. For example, if
the recordkeeping and reporting requirements of the CEA and CFTC's
rules do not address a security-based swap transaction, the firm will
need to treat it as a swap transaction for the purposes of the
recordkeeping and reporting requirements that apply to swap
transactions.
    Paragraph (b)(2) of Rule 18a-10 requires the firm to provide a
written disclosure to its counterparties after it begins operating
pursuant to the rule. The disclosure must be provided before the first
transaction with the counterparty after the firm begins operating
pursuant to the rule. The disclosure must notify the counterparty that
the firm is complying with the applicable capital, margin, and
segregation requirements of the CEA and the CFTC's rules in lieu of
complying with Rules 18a-1, 18a-3, and 18a-4. The Commission is
amending paragraph (b)(2) to reference the recordkeeping and reporting
requirements of the CEA and the CFTC's rules as well as Rules 18a-5,
18a-6, 18a-7, 18a-8, and 18a-9 in order to add these requirements to
the disclosure requirement.\506\
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    \506\ As amended, paragraph (b)(2) of Rule 18a-10 provides that
an SBSD must disclose in writing to each counterparty to a security-
based swap before entering into the first transaction with the
counterparty after the date the SBSD begins operating under this
section that the SBSD is operating under this section and is
therefore complying with the applicable capital, margin,
segregation, recordkeeping, and reporting requirements of the
Commodity Exchange Act and the rules promulgated by the Commodity
Futures Trading Commission thereunder in lieu of complying with the
capital, margin, segregation, recordkeeping, and reporting
requirements promulgated by the Commission in Sec. Sec.  240.18a-1,
240.18a-3, 240.18a-4; 240.18a-5, 240.18a-6, 240.18a-7, 240.18a-8,
and 240.18a-9.
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    Paragraph (b)(3) of Rule 18a-10 requires the SBSD to immediately
notify the Commission and the CFTC in writing if it fails to meet a
condition in paragraph (a) of the rule. The Commission is making a non-
substantive amendment to paragraph (b)(3) because--as discussed next--
new paragraph (b)(4) is being added to the rule.\507\ As discussed
above in section II.C. of this release, Rule 17a-11 specifies the
circumstances under which a broker-dealer must notify the Commission
and other regulators about its financial or operational condition, as
well as the form of the notice. Stand-alone and bank SBSDs and MSBSPs
are subject to Rule 18a-8, which is modeled on Rule 17a-11. Rule 18a-8
is designed to provide the Commission with the ability to take
effective proactive steps to respond when a stand-alone or bank SBSD is
experiencing or likely to experience financial difficulty.\508\
However, an SBSD operating under Rule 18a-10 may comply with the
notification requirements of the CFTC's rules in lieu of complying with
Rule 18a-8. Therefore, in order to retain a requirement that the SBSD
provide notice to the Commission if it is experiencing or likely to
experience financial difficulty, the Commission is adding paragraph
(b)(4) to Rule 18a-10. This paragraph provides that an SBSD operating
pursuant to Rule 18a-10 must simultaneously notify the Commission if
the firm is required to send a notice concerning its capital, books and
records, liquidity, margin operations, or segregation operations to the
CFTC by transmitting to the Commission a copy of the notice being sent
to the CFTC.\509\
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    \507\ The non-substantive amendment removes the period at the
end of the paragraph and in its place adds the text: ``; and.''
    \508\ See Recordkeeping and Reporting Proposing Release, 79 FR
at 25247.
    \509\ See paragraph (b)(4) of Rule 18a-10, as amended. See,
e.g., 17 CFR 1.12 (CFTC) (maintenance of minimum financial
requirements by futures commission merchants and introducing
brokers).
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    In addition, as discussed in section II.A.3.a. of this release,
paragraph (j) of Rule 17a-4 requires a broker-dealer to furnish
promptly to a representative of the Commission legible, true, complete,
and current copies of those records of the broker-dealer that are
required to be preserved under Rule 17a-4, or any other records of the
broker-dealer subject to examination under Section 17(b) of the
Exchange Act that are

requested by the representative of the Commission. Paragraph (g) of
Rule 18a-6 prescribes a parallel prompt production requirement for
stand-alone and bank SBSDs and MSBSPs. However, an SBSD operating under
Rule 18a-10 may comply with the record preservation requirements of the
CFTC's rules in lieu of complying with Rule 18a-6. Therefore, in order
to retain a requirement that the SBSD furnish records promptly to the
Commission, paragraph (b)(5) is being added to Rule 18a-10. This
paragraph provides that the SBSD must furnish promptly to a
representative of the Commission legible, true, complete, and current
copies of those records of the SBSD that are required to be preserved
under the CEA and CFTC's rules applicable to swap dealers, or any other
records of the SBSD subject to examination pursuant to Section 15F of
the Exchange Act that are requested by a representative of the
Commission.
    Paragraph (c) of Rule 18a-10 addresses the situation in which a
firm fails to comply with a condition in paragraph (a) of the rule and,
therefore, no longer qualifies to operate pursuant to the rule. The
paragraph provides that a firm in that circumstance must begin
complying with Rules 18a-1, 18a-3, and 18a-4 no later than either: (1)
Two months after the end of the month in which the firm failed to meet
the condition in paragraph (a); or (2) after a longer period of time as
granted by the Commission by order subject to any conditions imposed by
the Commission. The Commission is amending the preface to paragraph (c)
to reference Rules 18a-5, 18a-6, 18a-7, 18a-8, and 18a-9 in order to
add these rules to the compliance requirement.\510\
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    \510\ As amended, the preface to paragraph (c) of Rule 18a-10
reads: ``A security-based swap dealer that fails to meet one or more
of the conditions specified in paragraph (a) of this section must
begin complying with Sec. Sec.  240.18a-1 and 240.18a-3 through
240.18a-9 no later than:.''
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    Paragraph (d) of Rule 18a-10 addresses how a firm would elect to
operate pursuant to the rule. Under paragraph (d)(1), a firm can make
the election as part of the process of applying to register as an SBSD.
In this case, the firm must provide written notice to the Commission
and the CFTC during the registration process of its intent to operate
pursuant to the rule. Upon being registered as an SBSD, the firm can
begin complying with Rule 18a-10, provided it meets the conditions in
paragraph (a) of the rule. Under paragraph (d)(2) of Rule 18a-10, an
SBSD can make the election after the firm has been registered as an
SBSD. In this case, paragraph (d)(2)(i) provides that the firm must
provide written notice to the Commission and the CFTC of its intent to
operate pursuant to the rule. In addition, paragraph (d)(2)(ii)
provides that the firm must continue to comply with Rules 18a-1, 18a-3,
and 18a-4 for two months after the end of the month in which the firm
provides the notice or for a shorter period of time as granted by the
Commission by order subject to any conditions imposed by the
Commission. The Commission is amending the preface to paragraph
(d)(2)(ii) to reference Rules 18a-5, 18a-6, 18a-7, 18a-8, and 18a-9 in
order to add these rules to the compliance requirement.\511\
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    \511\ As amended, paragraph (d)(2)(ii) of Rule 18a-10 provides:
``Continue to comply with Sec. Sec.  240.18a-1 and 240.18a-3 through
240.18a-9 for at least:.''
---------------------------------------------------------------------------

    As discussed above, paragraph (b)(3) requires a firm operating
pursuant to the rule to immediately notify the Commission and the CFTC
in writing if the SBSD fails to meet a condition in paragraph (a).
Further, paragraphs (d)(1) and (2) require a firm to provide written
notice to the Commission and the CFTC of its intent to operate pursuant
to the rule. Paragraph (e) of Rule 18a-10 provides that the notices
required by the rule must be sent by facsimile transmission to the
principal office of the Commission and the regional office of the
Commission for the region in which the security-based swap dealer has
its principal place of business or to an email address to be specified
separately, and to the principal office of the CFTC in a manner
consistent with the notification requirements of the CFTC. The
paragraph also requires that notices include a brief summary of the
reason for the notice and contact information for an individual who can
provide further information about the matter that is the subject of the
notice (emphasis added). The Commission is amending paragraph (e) of
Rule 18a-10 to provide that the notice must be sent by facsimile
transmission to the principal office of the Commission and the regional
office of the Commission for the region in which the security-based
swap dealer has its principal place of business or to an email address
provided on the Commission's website, and to the principal office of
the CFTC in a manner consistent with the notification requirements of
the CFTC. This amendment is intended to clarify the location of the
email address for firms that choose to send the notice via email.

F. Cross-Border Application and Availability of Substituted Compliance

1. Cross-Border Application of Recordkeeping and Reporting Requirements
    In the 2013 cross-border proposing release, the Commission
preliminarily interpreted the Title VII requirements associated with
registration to apply generally to the activities of registered
entities.\512\ In reaching that preliminary conclusion, the Commission
did not concur with the views of certain commenters that the Title VII
requirements should not apply to the foreign security-based swap
activities of registered entities, stating that such a view could be
difficult to reconcile with, among other things, the statutory language
describing the requirements applicable to SBSDs.\513\ The Commission
further preliminarily identified the recordkeeping and reporting
requirements as entity-level requirements, rather than requirements
specifically applicable to particular transactions. Entity-level
requirements primarily address concerns relating to the entity as a
whole, with a particular focus on safety and soundness of the entity to
reduce systemic risk in the U.S. financial system. The Commission
accordingly proposed to apply the entity-level requirements on a firm-
wide basis to address risks to the SBSD as a whole. The Commission did
not propose any exception from the application of the entity-level
requirements to SBSDs.\514\
---------------------------------------------------------------------------

    \512\ See Trade Acknowledgment and Verification of Security-
Based Swap Transactions, 81 FR at 39825, n.191 (citing Cross-Border
Proposing Release, 78 FR at 30986).
    \513\ See Cross-Border Proposing Release, 78 FR at 30986.
    \514\ See Cross-Border Proposing Release, 78 FR at 31011. The
Commission similarly expressed the preliminary view that MSBSPs
should be required to adhere to the entity-level requirements. See
id. at 31035.
---------------------------------------------------------------------------

    A commenter expressed the view that requirements with respect to
daily trading records and confirmations should be deemed transaction-
level, on the grounds that the application and enforcement of these
requirements will be addressed at the transaction level, and for
consistency with the CFTC's approach.\515\ After considering the
commenter's concerns, the Commission continues to believe that the
entirety of the recordkeeping and reporting requirements--including
requirements addressing daily trading records and confirmations--
appropriately are considered entity-level requirements.\516\

If the Commission treated its recordkeeping requirements as
transaction-based requirements, and then excluded certain transactions
from its recordkeeping requirements, it would not be able to
effectively regulate and examine registrants. Not only would the
Commission have an incomplete picture of registrants' transactions if
other jurisdictions did not require records regarding the excluded
transactions, but this approach would create logistical complexities
when comparing records kept in different formats. These concerns about
an incomplete picture of a registrant's business are exacerbated by the
possibility that a registrant would not keep records of excluded
transactions because its jurisdiction does not regulate either the
transaction (e.g., exclusions for certain security-based swap products
or for certain transactions) or the entity. For these reasons, the
Commission is treating recordkeeping and reporting requirements as
entity-level requirements.
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    \515\ See SIFMA 9/5/2014 Letter.
    \516\ The Commission also believes that treating these
requirements as entity-level requirements is necessary or
appropriate to help prevent the evasion of the particular provisions
of the Exchange Act that were added by the Dodd-Frank Act and
prophylactically will help ensure that the purposes of those
provisions of the Dodd-Frank Act are not undermined.
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2. Availability of Substituted Compliance in Connection With
Recordkeeping and Reporting Requirements
a. Existing Substituted Compliance Rule
    In 2013, the Commission proposed to make substituted compliance
potentially available in connection with the requirements applicable to
foreign SBSDs pursuant to Section 15F of the Exchange Act, other than
the registration requirements applicable to dealers. Because the
recordkeeping and reporting requirements being adopted are grounded in
Section 15F, substituted compliance generally would have been available
for those requirements under the proposal.\517\ Upon a Commission
substituted compliance determination, a person would be able to satisfy
relevant recordkeeping or reporting requirements by substituting
compliance with corresponding requirements under a foreign regulatory
system.
---------------------------------------------------------------------------

    \517\ See Cross-Border Proposing Release, 78 FR at 30968, 31085.
---------------------------------------------------------------------------

    The Commission subsequently adopted Rule 3a71-6, which provides
that substituted compliance is available with respect to the
Commission's business conduct requirements, and (rather than addressing
all requirements under Section 15F of the Exchange Act) reserved the
issue as to whether substituted compliance also would be available in
connection with other requirements under that statute.\518\ Rule 3a71-6
was amended to make substituted compliance available with respect to
the Commission's trade acknowledgment and verification
requirements,\519\ and to make it available with respect to capital and
margin requirements.\520\
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    \518\ See Business Conduct Standards for Security-Based Swap
Dealers and Major Security-Based Swap Participants, 81 FR 29960. See
also Cross-Border Proposing Release, 78 FR at 31207.
    \519\ See Trade Acknowledgment and Verification of Security-
Based Swap Transactions, 81 FR at 30143-44.
    \520\ See Capital, Margin, and Segregation Adopting Release, 84
FR at 43946-50.
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b. Amendments to Final Rule
    A commenter requested that the Commission permit a foreign SBSD or
MSBSP to satisfy its recordkeeping requirements by complying with
recordkeeping rules established by its foreign regulator, provided the
Commission determines such rules impose requirements comparable to
Commission rules.\521\ Another commenter stated that ``[t]he Commission
should allow non-U.S. SBSDs to satisfy any public disclosure
requirements through substituted compliance.'' \522\ The Commission
agrees with the commenters and is amending Rule 3a71-6 to provide
foreign SBSDs and MSBSPs with the potential to utilize substituted
compliance with comparable foreign requirements to satisfy Section 15F
of the Exchange Act and Exchange Act Rules 18a-5, 18a-6, 18a-7, 18a-8,
and 18a-9 thereunder.\523\
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    \521\ See SIFMA 9/5/2014 Letter. See also Letter from Kyle
Brandon, Managing Director and Director of Research, Securities
Industry and Financial Markets Association (Jan. 13, 2015) (``SIFMA
1/13/2015 Letter'').
    \522\ See IIB 3/25/2019 Meeting.
    \523\ See paragraph (d)(6) of Rule 3a71-6, as amended. Rule
3a71-6 provides that substituted compliance is potentially available
in connection with the business conduct requirements for foreign
MSBSPs and SBSDs. This decision reflects the fact that the business
conduct standards apply to MSBSPs and SBSDs, and recognizes that the
market efficiency goals that underpin substituted compliance also
can apply when substituted compliance is granted to MSBSPs. See
Business Conduct Standards for Security-Based Swap Dealers and Major
Security-Based Swap Participants, 81 FR at 30076. This same
reasoning applies with respect to the Commission's recordkeeping and
reporting requirements and Rule 3a71-6, as amended, provides that
substituted compliance is also potentially available to foreign
MSBSPs (in addition to foreign SBSDs) with respect to Section 15F of
the Exchange Act and Rules 18a-5, 18a-6, 18a-7, 18a-8, and 18a-9, as
applicable.
---------------------------------------------------------------------------

    A commenter requested that foreign branches of U.S. banks (i.e.,
registered bank SBSDs that engage in dealing activity through foreign
branches) be eligible for substituted compliance with respect to
recordkeeping and reporting requirements classified as transaction-
level requirements.\524\ As discussed above, the Commission does not
believe it would be appropriate to the treat the recordkeeping and
reporting requirements as transaction-level requirements. In addition,
the Commission has previously stated its belief that substituted
compliance should not be available to registered entities that are U.S.
persons.\525\
---------------------------------------------------------------------------

    \524\ See SIFMA 9/5/2014 Letter.
    \525\ See Business Conduct Standards for Security-Based Swap
Dealers and Major Security-Based Swap Participants, 81 FR at 30077.
---------------------------------------------------------------------------

    In amending Rule 3a71-6, the Commission concludes that the
principles associated with substituted compliance for the business
conduct, trade acknowledgment and verification, and capital and margin
requirements in large part similarly apply to these recordkeeping and
reporting requirements. Accordingly, except as discussed below, the
revised substituted compliance rule applies to Section 15F of the
Exchange Act and Rules 18a-5, 18a-6, 18a-7, 18a-8, and 18a-9 thereunder
in the same manner as it applies to the business conduct, trade
acknowledgment and verification, and capital and margin requirements.
i. Basis for Substituted Compliance in Connection With the
Recordkeeping and Reporting Requirements
    In light of the global nature of the security-based swap market and
the prevalence of cross-border transactions within that market, there
is the potential that the application of the Title VII recordkeeping
and reporting requirements may lead to requirements that are
duplicative of or in conflict with applicable foreign requirements,
even when the two sets of requirements implement similar goals and lead
to similar results. Those results have the potential to disrupt
existing business relationships, and, more generally, to reduce
competition and market efficiency.\526\
---------------------------------------------------------------------------

    \526\ See generally Business Conduct Standards for Security-
Based Swap Dealers and Major Security-Based Swap Participants, 81 FR
at 30073-74 (addressing the basis for making substituted compliance
available in the context of the business conduct requirements).
---------------------------------------------------------------------------

    To address those effects, the Commission concludes that under
certain circumstances it may be appropriate to allow for the
possibility of substituted compliance whereby foreign SBSDs and MSBSPs
may satisfy Section 15F of the Exchange Act and Rules 18a-5, 18a-6,
18a-7, 18a-8, and 18a-9 thereunder by complying with

comparable foreign requirements. Allowing for the possibility of
substituted compliance in this manner may help achieve the benefits of
these recordkeeping and reporting requirements in a way that helps
avoid regulatory duplication or conflict and hence promotes market
efficiency, enhances competition, and facilitates a well-functioning
global security-based swap market. Accordingly, Rule 3a71-6 is amended
to identify the recordkeeping and reporting requirements of Section 15F
of the Exchange Act and Rules 18a-5, 18a-6, 18a-7, 18a-8, and 18a-9
thereunder as being eligible for substituted compliance.\527\
---------------------------------------------------------------------------

    \527\ See paragraph (d) of Rule 3a71-6, as adopted. Paragraph
(a)(1) of Rule 3a71-6 provides that the Commission may,
conditionally or unconditionally, by order, make a determination
with respect to a foreign financial regulatory system that
compliance with specified requirements under that foreign financial
system by a registered SBSD and/or registered MSBSP, or class
thereof, may satisfy the corresponding requirements identified in
paragraph (d) of the rule that would otherwise apply.
---------------------------------------------------------------------------

ii. Comparability Criteria, and Consideration of Related Requirements
    The Commission will endeavor to take a holistic approach in
determining the comparability of foreign requirements for substituted
compliance purposes, focusing on regulatory outcomes as a whole rather
than on requirement-by-requirement similarity.\528\ The Commission's
comparability assessments associated with Section 15F of the Exchange
Act and Rules 18a-5, 18a-6, 18a-7, 18a-8, and 18a-9 thereunder
accordingly will consider whether, in the Commission's view, the
foreign regulatory system achieves regulatory outcomes that are
comparable to the regulatory outcomes associated with these
recordkeeping and reporting requirements. However, paragraph (a)(2)(i)
of Rule 3a71-6 provides that the Commission's substituted compliance
determination will take into account factors that the Commission
determines appropriate, such as, for example the scope and objectives
of the relevant foreign regulatory requirements, as well as the
effectiveness of the supervisory compliance program administered, and
the enforcement authority exercised, by a foreign financial regulatory
authority or authorities in such system to support its oversight of
such foreign security-based swap entity (or class thereof) or of the
activities of such security-based swap entity (or class thereof).
---------------------------------------------------------------------------

    \528\ See, e.g., Business Conduct Standards for Security-Based
Swap Dealers and Major Security-Based Swap Participants, 81 FR at
30078-79.
---------------------------------------------------------------------------

    In reviewing applications, the Commission may determine to conduct
its comparability analyses regarding the recordkeeping and reporting
requirements in conjunction with comparability analyses regarding other
Exchange Act requirements in connection with SBSDs and MSBSPs.
Accordingly, depending on the applicable facts and circumstances, the
comparability assessment associated with the recordkeeping and
reporting requirements may constitute part of a broader assessment of
the foreign regulatory system's risk mitigation requirements, and the
applicable comparability assessments may be conducted at the level of
those risk mitigation requirements as a whole.
    Commenters generally requested additional guidance regarding the
criteria the Commission would consider when making a substituted
compliance determination.\529\ Such criteria have been set forth in the
final rule as discussed below. The Commission's recordkeeping,
reporting, notification, and security count requirements reflect and
support prudent business practices and accountability of registrants
and have facilitated the ability of securities regulators to review and
monitor compliance with securities laws. The Commission's recordkeeping
and reporting requirements are integral to the ability of the
Commission and other securities regulators to effectively examine and
inspect regulated firms' compliance with the applicable securities
laws.\530\ More specifically, the records that firms are required to
preserve can be reviewed by Commission staff and other securities
regulators to monitor compliance with applicable securities laws.\531\
Similarly, FOCUS Reports are used to determine which firms are engaged
in various securities-related activities, and how economic events and
government policies might affect segments of the securities
industry.\532\
---------------------------------------------------------------------------

    \529\ See, e.g., Letter from Catherine T. Dixon, Chair, Federal
Regulation of Securities Committee, American Bar Association (Oct.
2, 2013); Letter from Americans for Financial Reform (Aug. 22,
2013); Letter from Futures and Options Association (Aug. 21, 2013).
    \530\ See Commission Guidance to Broker-Dealers on the Use of
Electronic Storage Media Under the Electronic Signatures in Global
and National Commerce Act of 2000 with Respect to Rule 17a-4(f), 66
FR at 22917, 22921 (The Commission's recordkeeping rules ``impose
minimum recordkeeping requirements that are based on standards a
prudent broker-dealer should follow in the normal course of
business. The requirements are an integral part of the investor
protection function of the Commission, and other securities
regulators, in that the preserved records are the primary means of
monitoring compliance with applicable securities laws''. ``Investor
protection depends on the examination process, which, in turn,
relies on the records that broker-dealers are required to make and
maintain.''); FOCUS Reporting System; Requirements for Financial
Reporting, Exchange Act Release No. 17534 (Feb. 11, 1981), 46 FR
13205, 13205 (Feb. 20, 1981) (``The FOCUS Report is one of the
primary means of monitoring the financial and operational condition
of brokers and dealers and enforcing the financial responsibility
rules'').
    \531\ See Commission Guidance to Broker-Dealers on the Use of
Electronic Storage Media Under the Electronic Signatures in Global
and National Commerce Act of 2000 with Respect to Rule 17a-4(f), 66
FR at 22917.
    \532\ See FOCUS Reporting System; Requirements for Financial
Reporting, 46 FR at 13205.
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    The Commission's recordkeeping and reporting requirements are also
important for protecting customers against the risks involved in having
their securities held by a third party.\533\ A failure to maintain
accurate, accessible, and true records may lead to situations where a
firm cannot account for customer property or its own assets.\534\
Similarly, the Commission's reporting requirements promote transparency
of the financial and operational condition of broker-dealers to the
Commission, the firm's DEA, and, in the case of a portion of the annual
reports, to the public.\535\
---------------------------------------------------------------------------

    \533\ See Study of Unsafe and Unsound Practices of Brokers and
Dealers at 6 (the Commission's reporting requirements, ``together
with the Commission's inspection powers, [are] an integral element
in the arsenal for protection of customers against the risks
involved in leaving securities with their broker-dealer'').
    \534\ See Commission Guidance to Broker-Dealers on the Use of
Electronic Storage Media Under the Electronic Signatures in Global
and National Commerce Act of 2000 with Respect to Rule 17a-4(f), 66
FR at 22919 (``A failure to maintain accurate, accessible, and true
records may lead to situations where a firm cannot account for
customer property or its own assets. For these reasons, the
Commission's broker-dealer recordkeeping requirements are an
important part of managing systemic risk in the industry.'').
    \535\ See section II.B.1. of this release.
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    In light of these considerations, paragraph (d)(6) of Rule 3a71-6
states that prior to making a substituted compliance determination
regarding SBSD and MSBSP recordkeeping and reporting requirements, the
Commission intends to consider (in addition to any conditions imposed),
whether the foreign financial regulatory system's required records and
reports, the timeframes for recording or reporting information, the
accounting standards governing the records and reports, and the
required format of the records and reports are comparable to applicable
provisions arising under the Act and its rules and regulations and
would permit the Commission to examine and inspect regulated firms'
compliance with the applicable securities laws.
    A commenter stated that a Commission substituted compliance
determination should not be a

prerequisite for a foreign bank SBSD to comply with ``home-country''
financial recordkeeping and reporting requirements in lieu of the
Commission's requirements.\536\ The commenter referred to this approach
as ``Automatic Substituted Compliance'' for foreign bank SBSDs. Rule
3a71-6 does not provide ``automatic'' substituted compliance for any
type of registrant. Moreover, as discussed above, the Commission
preliminarily interpreted the Title VII requirements associated with
registration to apply generally to the activities of registered
entities.\537\ Further, in reaching that preliminary conclusion, the
Commission did not concur with the views of certain commenters that the
Title VII requirements should not apply to the foreign security-based
swap activities of registered entities, stating that such a view could
be difficult to reconcile with, among other things, the statutory
language describing the requirements applicable to SBSDs.\538\ The
Commission believes that it is appropriate to evaluate the substance of
a foreign regulatory system to which substituted compliance would apply
before granting substituted compliance to an entity. An ``automatic''
substituted compliance regime would be contrary to this view, as it
would permit a foreign bank SBSD to comply with local requirements
without any analyses by the Commission as to whether those requirements
were comparable to the Commission's requirements. Therefore, the
Commission does not believe the approach suggested by the commenter
would be appropriate.
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    \536\ See IIB 3/25/2019 Meeting.
    \537\ See Trade Acknowledgment and Verification of Security-
Based Swap Transactions, 81 FR at 39825, n.191 (citing Cross-Border
Proposing Release, 78 FR at 30986).
    \538\ See Cross-Border Proposing Release, 78 FR at 30986.
---------------------------------------------------------------------------

    The same commenter stated that the Commission should allow a
foreign stand-alone SBSD to satisfy financial recordkeeping and
reporting requirements through substituted compliance if the SBSD
qualifies for substituted compliance with respect to the Commission's
capital and margin requirements for SBSDs.\539\ The commenter referred
to this approach as ``One-Step Substituted Compliance.'' The Commission
does not believe that a positive substituted compliance determination
with respect to nonbank SBSD capital and margin requirements should
automatically result in a positive substituted compliance determination
with respect to SBSD recordkeeping and reporting requirements. Once
again, the Commission believes that it is appropriate to evaluate the
substance of each foreign regulatory system to which substituted
compliance would apply before granting substituted compliance to an
entity. As discussed above, the recordkeeping and reporting
requirements are integral to the ability of the Commission and other
securities regulators to effectively examine and inspect regulated
firms' compliance with the applicable securities laws, including
capital and margin requirements. Therefore, the Commission will need to
analyze a jurisdiction's recordkeeping and reporting requirements to
determine whether they would permit the Commission to examine and
inspect regulated firms' compliance with the applicable securities laws
in a manner comparable to its examinations and inspections for firms
subject to the recordkeeping and reporting requirements specified in
Section 15F of the Exchange Act and Rules 18a-5, 18a-6, 18a-7, 18a-8,
and 18a-9.
---------------------------------------------------------------------------

    \539\ See IIB 3/25/2019 Meeting.
---------------------------------------------------------------------------

    However, as discussed above, in reviewing substituted compliance
applications, the Commission may conduct its comparability analyses
regarding the recordkeeping and reporting requirements in conjunction
with comparability analyses regarding other Exchange Act requirements
that promote risk management in connection with SBSDs and MSBSPs. Thus,
the Commission's comparability analyses regarding the recordkeeping and
reporting requirements could be made in conjunction with comparability
analyses regarding capital and margin requirements.
    Finally, this commenter also stated that, if substituted compliance
is not available with respect to a disclosure requirement, ``the
Commission should limit the application of such public disclosure
requirements to SBSDs that are not otherwise subject to a public
disclosure regime.'' \540\ For example, the commenter argues that
paragraph (b)(7) of Rule 18a-7, as proposed, ``could require a
standalone SBSD that is a public reporting company to publish material,
non-public information every six months, rather than on an annual basis
on Form 20-F.'' \541\ Form 20-F, however, requires the public
disclosure of substantially more information than will be required by
Rule 18a-7, which requires relatively little information to be publicly
disclosed. Moreover, Rule 18a-7 will require the disclosure of
information such as a firm's net capital computation that may not be
required under other disclosure regimes. For these reasons, the
Commission is not adopting the commenter's proposed approach.
---------------------------------------------------------------------------

    \540\ See IIB 3/25/2019 Meeting.
    \541\ See IIB 3/25/2019 Meeting.
---------------------------------------------------------------------------

G. Amendments to Rule 18a-1

    Paragraph (e) of appendix E to Rule 15c3-1 establishes a non-
exclusive list of circumstances under which the Commission may restrict
the business of an ANC broker-dealer, including when the firm fails to
meet the reporting requirements set forth in Rule 17a-5 or an event
specified in Rule 17a-11 occurs. The Commission proposed a parallel
provision in Rule 18a-1 to apply to a stand-alone SBSD authorized to
use models.\542\ The circumstances in proposed Rule 18a-1 under which
the Commission could have restricted the stand-alone SBSD's business
included that the firm failed to meet a proposed reporting requirement
or an event in the proposed notification rule for SBSDs occurs. The
Commission adopted the provision in Rule 18a-1 under which the
Commission may restrict the business of a stand-alone SBSD or OTCDD/
SBSD authorized to use models.\543\ However, in the final rule, the
circumstances under which the Commission can restrict a firm's business
did not include that the firm fails to meet a reporting requirement or
an event in the notification rule for SBSDs occurs. As the SBSD
reporting and notification rules are being adopted in this document,
the Commission is amending Rule 18a-1 to add the these circumstances to
those listed in the rule under which the Commission may restrict the
business of a stand-alone SBSD or OTCDD/SBSD authorized to use models:
(1) The SBSD fails to meet the reporting requirements set forth in Rule
18a-7; or (2) any event specified in Rule 18a-8 occurs.\544\
---------------------------------------------------------------------------

    \542\ See Capital, Margin, and Segregation Proposing Release, 77
FR at 70240, 70338.
    \543\ See Capital, Margin, and Segregation Adopting Release, 84
FR at 44058-59.
    \544\ See paragraphs (d)(9)(iii)(A) and (B) of Rule 18a-1, as
amended.
---------------------------------------------------------------------------

H. Delegation of Authority

    In recognition of the adoption in this document of recordkeeping,
reporting, and notification requirements for SBSDs and MSBSPs,
securities count requirements applicable to certain SBSDs, and
additional recordkeeping requirements applicable to broker-dealers to
account for their security-based swap and swap activities in accordance
with the Dodd-Frank Act, the Commission is amending its rule governing
delegations of authority to the Director of the Division of Trading and
Markets (``Division'').

    Because OTC derivatives dealers will be required to file FOCUS
Report Part II instead of FOCUS Report Part IIB, the reference to FOCUS
Report Part IIB is being changed to FOCUS Report Part II. Specifically,
paragraph (a)(65) of 17 CFR 200.30-3 (``Rule 30-3'') is being amended
to delegate authority to the Division to authorize the issuance of
orders requiring OTC derivatives dealers to file FOCUS Report Part II
instead of FOCUS Report Part IIB. In addition, due to re-numbering of
paragraphs as a result of these amendments, paragraph (a)(30) of Rule
30-3 is amended to cross-reference paragraph (a)(3) instead of
paragraph (a)(4) of Rule 17a-5. Finally, paragraph (a)(65)'s cross-
reference to Rule 17a-12 is corrected to read ``Sec.  240.17a-
12(a)(1)(ii)'' instead of ``Sec.  240.17a-12(a)(ii),'' \545\ and
paragraph (a)(5)'s cross-reference to Rule 17a-5 is corrected to read
``Sec.  240.17a-5(m)(3) of this chapter (Rule 17a-5(m)(3))'' instead of
``Rule 17a-5(1)(3) (Sec.  240.17a-5(1)(3) of this chapter).'' These
delegations of authority are intended to preserve Commission resources
and increase the effectiveness and efficiency of the Commission's
oversight of compliance with the financial responsibility rules.
Nevertheless, the Division may submit matters to the Commission for its
consideration, as it deems appropriate.
---------------------------------------------------------------------------

    \545\ See paragraph (a)(65)(i) of Rule 30-3 under the Exchange
Act, as amended.
---------------------------------------------------------------------------

Administrative Law Matters
    The Commission finds, in accordance with the Administrative
Procedure Act (``APA''),\546\ that these amendments relate solely to
agency organization, procedure, or practice, and do not relate to a
substantive rule. Accordingly, the provisions of the APA regarding
notice of rulemaking, opportunity for public comment, and publication
of the amendment prior to its effective date are not applicable. For
the same reason, and because this amendment does not substantively
affect the rights or obligations of non-agency parties, the provisions
of the Small Business Regulatory Enforcement Fairness Act,\547\ are not
applicable. Additionally, the provisions of the Regulatory Flexibility
Act, which apply only when notice and comment are required by the APA
or other law,\548\ are not applicable. Further, because this amendment
imposes no new burdens on private persons, the Commission does not
believe that the amendment will have any anti-competitive effects for
purposes of Section 23(a)(2) of the Exchange Act.\549\ Finally, this
amendment does not contain any collection of information requirements
as defined by the Paperwork Reduction Act of 1980, as amended.
---------------------------------------------------------------------------

    \546\ See 5 U.S.C. 553(b)(3)(A).
    \547\ See 5 U.S.C. 804(3)(C).
    \548\ See 5 U.S.C. 603.
    \549\ See 15 U.S.C. 78w(a)(2).
---------------------------------------------------------------------------

III. Explanation of Dates

A. Effective Date

    These final rules will be effective 60 days following publication
of this release in the Federal Register.

B. Compliance Date

    The compliance date for the rules being adopted in this document,
other than the amendments to Rule 3a71-6 discussed below, will be 18
months after the effective date of any final rules originally proposed
in May 2019 addressing the cross-border application of certain
security-based swap requirements.\550\ As set forth recently in the
release adopting capital, margin, and segregation requirements, this
compliance date will also be the compliance date for SBSD and MSBSP
registration requirements (the ``Registration Compliance Date'').\551\
The Commission believes the compliance date provided in this release,
which will be in excess of 18 months, will allow sufficient time to
prepare for and come into compliance with the new recordkeeping and
reporting requirements.
---------------------------------------------------------------------------

    \550\ The Commission proposed rules on May 10, 2019 which
include rules and/or guidance regarding security-based swap
transactions ``arranged, negotiated, or executed'' by personnel
located in the United States, the cross-border scope of the SBSD de
minimis exception, the certification and opinion of counsel
requirement of Rule 15Fb2-1, the questionnaire and application
requirement of Rule 18a-5, and the cross-border application of the
statutory disqualification prohibition within Section 15F(b)(6) of
the Exchange Act. See Cross-Border Application Proposing Release, 84
FR at 24206.
    \551\ See Capital, Margin, and Segregation Adopting Release, 84
FR at 43954-57. Moreover, as explained in that release, the
Registration Compliance Date will also be the compliance date for
(1) nonbank SBSD and MSBSP capital and margin requirements; (2) SBSD
and MSBSP segregation requirements; (3) SBSD and MSBSP business
conduct and chief compliance officer requirements; and (4) SBSD and
MSBSP trade acknowledgement and verification requirements. See also
Business Conduct Standards for Security-Based Swap Dealers and Major
Security-Based Swap Participants, 81 FR at 30081; see also Trade
Acknowledgment and Verification of Security-Based Swap Transactions,
81 FR 39807.
---------------------------------------------------------------------------

    A commenter asked to delay cross-border application of the
Commission's recordkeeping and reporting rules with respect to home
jurisdiction regulations that have not yet been finalized, as a
preferable solution to requiring foreign firms to build the
technological, operational, and compliance systems required to comply
with U.S. law for a short, interim period if the home jurisdiction is
ultimately deemed comparable for substituted compliance purposes.\552\
The commenter's concerns should be mitigated by the extended compliance
date applicable to the rules being adopted in this document. The
Commission believes that such a delay would not be appropriate because
a comprehensive set of records will be integral to the Commission's
ability to exercise its regulatory responsibilities once these firms
are registered.\553\ In addition, as discussed below in section III.D.
of this release, to address concerns that the compliance date could be
before substituted compliance determinations are made, the Commission
would consider substituted compliance requests that are submitted prior
to the compliance date.
---------------------------------------------------------------------------

    \552\ See SIFMA 9/5/2014 Letter.
    \553\ See Recordkeeping and Reporting Proposing Release, 79 FR
at 25197 (``The recordkeeping, reporting, notification, and
securities count requirements applicable to broker-dealers are an
integral part of the financial responsibility rules as they are
designed to provide transparency into the business activities of
broker-dealers and to assist the Commission and other securities
regulators in reviewing and monitoring compliance with the capital,
margin, and segregation requirements.'').
---------------------------------------------------------------------------

    Finally, one commenter stated that SBSDs and MSBSPs will require
adequate time following registration to begin complying with
substantive Title VII requirements, since considerable resources will
be needed to amend recordkeeping systems and documentation processes
between finalization of recordkeeping and documentation rules and the
initial compliance dates for those rules.\554\ Regarding the
Commission's policy statement on the sequencing of final rules
governing security-based swaps,\555\ another commenter suggested
grouping rulemakings into two categories in terms of the applicable
compliance date.\556\ In response, the Commission notes that it has
coordinated the compliance dates

for the Commission's: (1) SBSD and MSBSP registration requirements; (2)
nonbank SBSD and MSBSP capital and margin requirements; (3) SBSD and
MSBSP segregation requirements; (4) SBSD and MSBSP recordkeeping and
reporting requirements; (5) SBSD and MSBSP business conduct and chief
compliance officer requirements; (6) SBSD and MSBSP trade
acknowledgement and verification requirements; and (7) statutory
disqualification process. The Commission also does not believe it would
be appropriate to delay the compliance date for the Commission's
recordkeeping rules beyond the compliance date for the rules
establishing the registration process for SBSDs and MSBSPs, because
this would undermine the Commission's ability to effectively regulate
and supervise registrants.
---------------------------------------------------------------------------

    \554\ See Letter from Kenneth E. Bentsen, Jr., Executive Vice
President, Public Policy and Advocacy, Securities Industry and
Financial Markets Association (Aug. 13, 2012) (``SIFMA 8/13/2012
Letter''). See also Memorandum from Richard E. Grant, Office of
Commissioner Michael S. Piwowar, regarding an email from Sarah A.
Miller, Chief Executive Officer, Institute of International Bankers
(Nov. 16, 2016) (``IIB 11/16/2016 Letter'').
    \555\ See Statement of General Policy on the Sequencing of the
Compliance Dates for Final Rules Applicable to Security-Based Swaps
Adopted Pursuant to the Securities Exchange Act of 1934 and the
Dodd-Frank Wall Street Reform and Consumer Protection Act, Exchange
Act Release No. 67177 (June 11, 2012), 77 FR 35625 (June 14, 2012).
Comments on the sequencing policy statement which are relevant to
the Commission's recordkeeping and reporting requirements are
available at http://www.sec.gov/comments/s7-05-12/s70512.shtml.
    \556\ See Letter from Chris Barnard (Aug. 13, 2012).
---------------------------------------------------------------------------

C. Effect on Existing Commission Exemptive Relief

    On July 1, 2011, the Commission issued an order granting, among
other things, temporary exemptive relief from compliance with certain
recordkeeping and reporting provisions of the Exchange Act that would
have applied to the security-based swap activities of registered
broker-dealers due to the expansion of the Exchange Act definition of
``security'' to include security-based swaps.\557\ The compliance dates
of this release implicate the expiration of this temporary exemptive
relief related to registered broker-dealer recordkeeping and reporting
requirements.
---------------------------------------------------------------------------

    \557\ See Order Granting Temporary Exemptions under the
Securities Exchange Act of 1934 in Connection with the Pending
Revisions of the Definition of ``Security'' to Encompass Security-
Based Swaps, Exchange Act Release No. 64795 (July 1, 2011), 76 FR
39927 (July 7, 2011) (``Exchange Act Exemptive Order'').
---------------------------------------------------------------------------

    With regard to the recordkeeping and reporting obligations of
registered broker-dealers, the Exchange Act Exemptive Order provided
limited exemptions for registered broker-dealers, subject to certain
conditions and limitations, from compliance with Sections 17(a) and
17(b) of the Exchange Act and Rules 17a-3, 17a-4, 17a-5, 17a-11, and
17a-13 (collectively, ``the Recordkeeping Provision Exemptions'') in
connection with security-based swaps solely to the extent the
provisions or rules did not apply to the broker-dealer's security-based
swap positions or activities as of July 15, 2011.\558\ The Exchange Act
Exemptive Order also provided that, until such time as the underlying
exemptive relief expires, no contract entered into on or after July 16,
2011 shall be void or considered voidable by reason of Section 29(b) of
the Exchange Act because any person that is a party to the contract
violated a provision of the Exchange Act for which the Commission
provided exemptive relief in the Exchange Act Exemptive Order
(``Section 29(b) Exemption).\559\ The Recordkeeping Provision
Exemptions are scheduled to expire on the compliance date for any final
rules regarding recordkeeping and reporting requirements for SBSDs and
MSBSPs.\560\ Accordingly, all the Recordkeeping Provision Exemptions,
together with the portion of the Section 29(b) Exemption that relates
to the Exchange Act provisions for which the Commission provided
exemptive relief in the Recordkeeping Provision Exemptions, will expire
upon the compliance date set forth in section III.B. of this release.
---------------------------------------------------------------------------

    \558\ See Exchange Act Exemptive Order at 39938-39.
    \559\ See Exchange Act Exemptive Order at 39940.
    \560\ The Recordkeeping Provision Exemptions originally were set
to expire on the compliance date for any final rules further
defining the terms ``security-based swap'' and ``eligible contract
participant.'' See Exchange Act Exemptive Order at 39938-39. In the
final rules further defining the term ``security-based swap,'' the
Commission extended this expiration date to February 13, 2013. See
Further Definition of ``Swap,'' ``Security-Based Swap,'' and
``Security-Based Swap Agreement''; Mixed Swaps; Security-Based Swap
Agreement Recordkeeping, 77 FR at 48304. On February 7, 2013, the
Commission extended the expiration date until February 11, 2014. See
Order Extending Temporary Exemptions under the Securities Exchange
Act of 1934 in Connection with the Revision of the Definition of
``Security'' to Encompass Security-Based Swaps, and Request for
Comment, Exchange Act Release No. 68864 (Feb. 7, 2013), 78 FR 10218,
10220 (Feb. 13, 2013). On February 5, 2014, the Commission further
extended the expiration date until the compliance date set forth in
any recordkeeping and reporting rules for SBSDs and MSBSPs. See
Order Extending Temporary Exemptions under the Securities Exchange
Act of 1934 in Connection with the Revision of the Definition of
``Security'' to Encompass Security-Based Swaps, and Request for
Comment, Exchange Act Release No. 71485 (Feb. 5, 2014), 79 FR 7731,
7734 (Feb. 10, 2014) (``Exchange Act Exemption Extension Order'').
---------------------------------------------------------------------------

    In addition, the Commission also has provided an exemption from the
``dealer'' registration requirements of Section 15(a)(1) of the
Exchange Act, and the other requirements of the Exchange Act and the
rules and regulations thereunder that apply to a dealer that is not
registered with the Commission, solely in connection with dealing
activities involving security-based swaps with counterparties that meet
the definition of eligible contract participant as set forth in Section
1a(12) of the CEA as in effect on July 20, 2010 (``Dealer
Exemptions'').\561\ The Dealer Exemptions are scheduled to expire on
the later of the compliance dates set forth in any final rules
regarding capital, margin, and segregation requirements for SBSDs and
MSBSPs and any final rules regarding recordkeeping and reporting
requirements for SBSDs and MSBSPs \562\ As noted in section III.B. of
this release, both relevant compliance dates will be 18 months after
the effective date of any final rules addressing the cross-border
application of certain security-based swap requirements or the
Registration Compliance Date. Accordingly, all of the Dealer
Exemptions, together with the portion of the Section 29(b) Exemption
that relates to the Exchange Act provisions for which the Commission
provided exemptive relief in the Dealer Exemptions, will expire upon
the Registration Compliance Date.
---------------------------------------------------------------------------

    \561\ See Exchange Act Exemptive Order at 39939.
    \562\ The Dealer Exemptions originally were set to expire on the
compliance date for any final rules further defining the terms
``security-based swap'' and ``eligible contract participant.'' See
Exchange Act Exemptive Order at 39938, 39940. In the final rules
further defining the term ``security-based swap,'' the Commission
extended this expiration date to February 13, 2013. See Further
Definition of ``Swap,'' ``Security-Based Swap,'' and ``Security-
Based Swap Agreement''; Mixed Swaps; Security-Based Swap Agreement
Recordkeeping, 77 FR at 48304. On February 7, 2013, the Commission
again extended the expiration date until February 11, 2014. See
Order Extending Temporary Exemptions under the Securities Exchange
Act of 1934 in Connection with the Revision of the Definition of
``Security'' to Encompass Security-Based Swaps, and Request for
Comment, 78 FR at 10220. On February 5, 2014, the Commission further
extended the expiration date until the later of the compliance dates
set forth in any final rules regarding capital, margin, and
segregation requirements for SBSDs and MSBSPs and any final rules
regarding recordkeeping and reporting requirements for SBSDs and
MSBSPs. See Exchange Act Exemption Extension Order at 7734-35.
---------------------------------------------------------------------------

    Finally, the Commission has provided an exemption from the
``broker'' registration requirements of Section 15(a)(1) of the
Exchange Act, and the other requirements of the Exchange Act and the
rules and regulations thereunder that apply to a broker that is not
registered with the Commission, solely in connection with broker
activities involving security-based swaps (``Broker Exemptions'').\563\
The Broker Exemptions are scheduled to expire on the later of the
compliance dates set forth in any final rules regarding capital,
margin, and segregation requirements for SBSDs and MSBSPs and any final
rules regarding recordkeeping and reporting requirements for SBSDs and
MSBSPs.\564\

However, the Commission has stated that an entity that meets the
definition of ``security-based swap execution facility'' in Section
3(a)(77) of the Exchange Act also would meet the definition of
``broker'' in Section 3(a)(4) of the Act.\565\ The Commission also has
granted temporary exemptions from the registration requirements for
security-based swap execution facilities in Section 3D(a)(1) of the
Exchange Act and from certain disclosure requirements in Section 3D(c)
of the Exchange Act (``SB SEF Exemptions'').\566\ The SB SEF Exemptions
will expire on the earliest compliance date set forth in any of the
final rules regarding registration of security-based swap execution
facilities.\567\ The Commission recognizes that market participants who
currently rely on the SB SEF Exemptions pending the Commission's
finalization of registration rules for security-based swap execution
facilities may also currently rely on the Broker Exemptions. The
Commission therefore finds that it is necessary and appropriate in the
public interest and consistent with the protection of investors to
extend the Broker Exemptions, insofar as they apply to persons and
activities subject to the SB SEF Exemptions, until the expiration date
for the SB SEF Exemptions.\568\
---------------------------------------------------------------------------

    \563\ See Exchange Act Exemptive Order at 39939.
    \564\ The Broker Exemptions originally were set to expire on the
compliance date for any final rules further defining the terms
``security-based swap'' and ``eligible contract participant.'' See
Exchange Act Exemptive Order at 39938, 39940. In the final rules
further defining the term ``security-based swap,'' the Commission
extended this expiration date to February 13, 2013. See Further
Definition of ``Swap,'' ``Security-Based Swap,'' and ``Security-
Based Swap Agreement''; Mixed Swaps; Security-Based Swap Agreement
Recordkeeping, 77 FR at 48304. On February 7, 2013, the Commission
again extended the expiration date until February 11, 2014. See
Order Extending Temporary Exemptions under the Securities Exchange
Act of 1934 in Connection with the Revision of the Definition of
``Security'' to Encompass Security-Based Swaps, and Request for
Comment, 78 FR at 10220. On February 5, 2014, the Commission further
extended the expiration date until the later of the compliance dates
set forth in any final rules regarding capital, margin, and
segregation requirements for SBSDs and MSBSPs and any final rules
regarding recordkeeping and reporting requirements for SBSDs and
MSBSPs. See Exchange Act Exemption Extension Order at 7734-35.
    \565\ Registration and Regulation of Security-Based Swap
Execution Facilities, Exchange Act Release No. 63825 (Feb. 2, 2011),
76 FR 10948, 10959 (Feb. 28, 2011).
    \566\ See Temporary Exemptions and Other Temporary Relief,
Together with Information on Compliance Dates for New Provisions of
the Securities Exchange Act of 1934 Applicable to Security-Based
Swaps, Exchange Act Release No. 64678 (June 15, 2011), 76 FR 36287,
36292-93, 36306 (June 22, 2011).
    \567\ See id.
    \568\ See 15 U.S.C. 78mm.
---------------------------------------------------------------------------

    Accordingly, solely for purposes of the Exchange Act Exemption
Extension Order as it relates to exemption from the ``broker''
registration requirements of Section 15(a)(1) of the Exchange Act and
the other requirements of the Exchange Act and the rules and
regulations thereunder that apply to a broker that is not registered
with the Commission, and solely in connection with the operation of a
facility for the trading or processing of security-based swaps that is
not currently registered as a national securities exchange or as a
security-based swap execution facility (``SB SEF Broker Exemptions''),
the compliance date is the expiration date of the SB SEF Exemptions.
Similarly, solely for purposes of the Exchange Act Exemption Extension
Order as it relates to the portion of the Section 29(b) Exemption that
relates to the Exchange Act provisions for which the Commission
provided exemptive relief in the SB SEF Broker Exemptions, the
compliance date set forth in this release is the expiration date of the
SB SEF Exemptions. All other portions of the Broker Exemptions,
together with the portion of the Section 29(b) Exemption that relates
to the Exchange Act provisions for which the Commission provided
exemptive relief in these other portions of the Broker Exemptions, will
expire upon the Registration Compliance Date.

D. Application to Substituted Compliance

    For the amendments to Rule 3a71-6 being adopted in this release to
provide foreign SBSDs and MSBSPs with the potential to utilize
substituted compliance with comparable foreign requirements to satisfy
Section 15F of the Exchange Act and new Exchange Act Rules 18a-5, 18a-
6, 18a-7, 18a-8, and 18a-9, consistent with the other rules adopted in
this document, the Commission is adopting an effective date of 60 days
following publication in the Federal Register. There will be no
separate compliance date in connection with that rule amendment, as the
rule does not impose obligations upon entities. As discussed above,
SBSDs and MSBSPs will not be required to comply with the recordkeeping
and reporting requirements until they are registered, and the
registration requirement for those entities will not be triggered until
a number of regulatory benchmarks have been met.
    In practice, the Commission recognizes that if the requirements of
a foreign regime are comparable to Title VII requirements, and the
other prerequisites to substituted compliance also have been satisfied,
then it may be appropriate to permit an SBSD or MSBSP to rely on
substituted compliance commencing at the time that entity is registered
with the Commission. Accordingly, to address commenters' concerns that
the compliance date could be before substituted compliance
determinations are made, the Commission would consider substituted
compliance requests that are submitted prior to the compliance date for
its recordkeeping and reporting requirements.

IV. Paperwork Reduction Act

    Certain provisions of the rule amendments and new rules being
adopted in this release contain a new ``collection of information''
within the meaning of the Paperwork Reduction Act of 1995
(``PRA'').\569\ The Commission submitted the rule amendments and new
rules to the Office of Management and Budget (``OMB'') for review and
approval in accordance with the PRA.\570\ The Commission's earlier PRA
assessments have been revised to reflect the modifications to the rules
and amendments from those that were proposed, as well as additional
information and data now available to the Commission.\571\ An agency
may not conduct or sponsor, and a person is not required to respond to,
a collection of information unless it displays a currently valid OMB
control number. The titles and OMB control numbers for the collections
of information are:
---------------------------------------------------------------------------

    \569\ See 44 U.S.C. 3501 et seq.
    \570\ See 44 U.S.C. 3507(d); 5 CFR 1320.11.
    \571\ The hourly rates use for internal professionals used
throughout this section IV. of the release are taken from SIFMA's
Management & Professional Earnings in the Securities Industry 2013,
modified to account for an 1800-hour work-year and inflation, and
multiplied by 5.35 to account for bonuses, firm size, employee
benefits, and overhead, in addition to SIFMA's Office Salaries in
the Securities Industry 2013, modified by Commission staff to
account for an 1800-hour work-year and inflation, and multiplied by
2.93 to account for bonuses, firm size, employee benefits, and
overhead.

----------------------------------------------------------------------------------------------------------------
                                                                                OMB control
                Rule                                          Rule title                                No.
----------------------------------------------------------------------------------------------------------------
Rule 17a-3..........................  Records to be made by certain exchange members, brokers          3235-0033
                                       and dealers.
Rule 17a-4..........................  Records to be preserved by certain exchange members,             3235-0279
                                       brokers and dealers.
Rule 17a-5..........................  Reports to be made by certain brokers and dealers.........       3235-0123

Rule 17a-11.........................  Notification provisions for brokers and dealers...........       3235-0085
Rule 17a-12.........................  Reports to be made by certain OTC derivatives dealers.....       3235-0498
Rule 18a-5..........................  Records to be made by certain security-based swap dealers        3235-0745
                                       and major security-based swap participants.
Rule 18a-6..........................  Records to be preserved by certain security-based swap           3235-0751
                                       dealers and major security-based swap participants.
Rule 18a-7..........................  Reports to be made by certain security-based swap dealers        3235-0749
                                       and major security-based swap participants.
Rule 18a-8..........................  Notification provisions for security-based swap dealers          3235-0750
                                       and major security-based swap participants.
Rule 18a-9..........................  Quarterly security counts to be made by certain security-        3235-0752
                                       based swap dealers.
Rule 18a-10.........................  Alternative compliance mechanism for security-based swap         3235-0702
                                       dealers that are registered as swap dealers and have
                                       limited security-based swap activities.
Rule 3a71-6.........................  Substituted compliance for security-based swap dealers and       3235-0715
                                       major security-based swap participants.
----------------------------------------------------------------------------------------------------------------

A. Summary of Collections of Information Under the Rule Amendments and
New Rules

1. Amendments to Rule 17a-3 and New Rule 18a-5
    Rule 17a-3 requires a broker-dealer to make and keep current
certain records. The Commission is amending this rule to account for
the security-based swap and swap activities of broker-dealers,
including broker-dealer SBSDs and MSBSPs. With respect to stand-alone
SBSDs and MSBSPs, and bank SBSDs and MSBSPs, the Commission is adopting
new Rule 18a-5--which is modeled on Rule 17a-3, as amended--to require
these registrants to make and keep current certain records.\572\ Rule
18a-5 does not include a parallel requirement for every requirement in
Rule 17a-3. Paragraph (a) of Rule 18a-5 contains recordkeeping
requirements for stand-alone SBSDs and MSBSPs, and paragraph (b)
contains recordkeeping requirements for bank SBSDs and MSBSPs that are
more limited in scope. The amendments to Rule 17a-3 and new Rule 18a-5
establish a number of new collections of information, as summarized in
the table below.
---------------------------------------------------------------------------

    \572\ See Rule 18a-5, as adopted.

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                                                                                Non-model                                       Non-model          Model
                                                                  Stand-alone    broker-dealer    ANC broker-    Broker-dealer    stand-alone   stand[dash]alone    Bank SBSDs      Stand-alone
                                                                broker-dealers       SBSDs       dealer SBSDs       MSBSPs           SBSDs            SBSDs                           MSBSPs
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Trade blotters................................................   * 17a-3(a)(1)   * 17a-3(a)(1)   * 17a-3(a)(1)   * 17a-3(a)(1)     18a-5(a)(1)      18a-5(a)(1)      18a-5(b)(1)     18a-5(a)(1)
General ledger................................................  ..............  ..............  ..............  ..............     18a-5(a)(2)      18a-5(a)(2)   ..............     18a-5(a)(2)
Ledgers for customer and non-customer accounts................   * 17a-3(a)(3)   * 17a-3(a)(3)   * 17a-3(a)(3)   * 17a-3(a)(3)     18a-5(a)(3)      18a-5(a)(3)      18a-5(b)(2)     18a-5(a)(3)
Stock record..................................................   * 17a-3(a)(5)   * 17a-3(a)(5)   * 17a-3(a)(5)   * 17a-3(a)(5)     18a-5(a)(4)      18a-5(a)(4)      18a-5(b)(3)     18a-5(a)(4)
Memoranda of brokerage orders.................................   * 17a-3(a)(6)   * 17a-3(a)(6)   * 17a-3(a)(6)   * 17a-3(a)(6)  ..............  ................     18a-5(b)(4)  ..............
Memoranda of proprietary orders...............................   * 17a-3(a)(7)   * 17a-3(a)(7)   * 17a-3(a)(7)   * 17a-3(a)(7)     18a-5(a)(5)      18a-5(a)(5)      18a-5(b)(5)     18a-5(a)(5)
Confirmations.................................................   * 17a-3(a)(8)   * 17a-3(a)(8)   * 17a-3(a)(8)   * 17a-3(a)(8)     18a-5(a)(6)      18a-5(a)(6)      18a-5(b)(6)     18a-5(a)(6)
Accountholder information.....................................   * 17a-3(a)(9)   * 17a-3(a)(9)   * 17a-3(a)(9)   * 17a-3(a)(9)     18a-5(a)(7)      18a-5(a)(7)      18a-5(b)(7)     18a-5(a)(7)
Options positions.............................................  ..............  ..............  ..............  ..............     18a-5(a)(8)      18a-5(a)(8)   ..............     18a-5(a)(8)
Trial balances and computation of net capital.................  ..............  ..............  ..............  ..............     18a-5(a)(9)      18a-5(a)(9)   ..............     18a-5(a)(9)
Associated person's employment application....................  ..............  ..............  ..............  ..............    18a-5(a)(10)     18a-5(a)(10)      18a-5(b)(8)    18a-5(a)(10)
Account equity and margin calculations under Rule 18a-3.......  ..............    17a-3(a)(25)    17a-3(a)(25)    17a-3(a)(25)    18a-5(a)(12)     18a-5(a)(12)   ..............    18a-5(a)(12)
Possession or control requirements for security-based swap        17a-3(a)(26)    17a-3(a)(26)    17a-3(a)(26)    17a-3(a)(26)    18a-5(a)(13)     18a-5(a)(13)      18a-5(b)(9)  ..............
 customers....................................................
Security-based swap customer reserve requirements.............    17a-3(a)(27)    17a-3(a)(27)    17a-3(a)(27)    17a-3(a)(27)    18a-5(a)(14)     18a-5(a)(14)     18a-5(b)(10)  ..............
Unverified transactions.......................................  ..............    17a-3(a)(28)    17a-3(a)(28)    17a-3(a)(28)    18a-5(a)(15)     18a-5(a)(15)     18a-5(b)(11)    18a-5(a)(15)
Political contributions.......................................  ..............    17a-3(a)(29)    17a-3(a)(29)  ..............    18a-5(a)(16)     18a-5(a)(16)     18a-5(b)(12)  ..............
Compliance with business conduct requirements.................  ..............    17a-3(a)(30)    17a-3(a)(30)    17a-3(a)(30)    18a-5(a)(17)     18a-5(a)(17)     18a-5(b)(13)    18a-5(a)(17)
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* The Commission is amending these pre-existing paragraphs of Rule 17a-3 to account for the security-based swap and swap activities of broker-dealers, including broker-dealer SBSDs and MSBSPs.

    A commenter urged the Commission to harmonize its recordkeeping
requirements for SBSDs and MSBSPs with the CFTC's final recordkeeping
requirements for swap dealers and major swap participants to the
maximum extent possible, with the goal of permitting firms to utilize a
single recordkeeping system for swaps and security-based swaps.\573\ As
discussed in more detail above, in response to the comment and to
promote harmonization with CFTC requirements, the Commission is
adopting a limited alternative compliance mechanism in Rules 17a-3 and
18a-5.\574\ In particular, an SBSD or MSBSP that also is registered
with the CFTC as a swap dealer or major swap participant may comply
with the recordkeeping requirements of the CEA and the rules thereunder
applicable to swap dealers and major swap participants in lieu of
complying with the requirements in Rules 17a-3 and 18a-5 to make and
keep current trade blotters, customer account ledgers, and stock
records

solely with respect to information required to be included in these
records regarding security-based swap transactions and positions if the
SBSD or MSBSP meets certain conditions. The conditions include, among
other things, that the SBSD or MSBSP preserves all of the data elements
necessary to create these records as they pertain to security-based
swap and swap transactions and upon request promptly furnishes to
representatives of the Commission such records that includes security-
based swap and swap transactions and positions in the format required
by Rule 17a-3 or 18a-5, as applicable. This provision will permit an
SBSD or MSBSP that also is registered with the CFTC as a swap dealer or
major swap participant to maintain a single recordkeeping system for
security-based swap and swap transactions and positions in accordance
with the CFTC's rules with respect to these required records.
---------------------------------------------------------------------------

    \573\ See SIFMA 9/5/2014 Letter.
    \574\ See paragraph (b) of Rule 17a-3, as amended; paragraph (c)
of Rule 18a-5, as adopted.
---------------------------------------------------------------------------

2. Amendments to Rule 17a-4 and New Rule 18a-6
    Rule 17a-4 requires a broker-dealer to preserve certain records if
it makes or receives them and prescribes the time period and the manner
in which records must be preserved. The Commission is amending this
rule to account for the security-based swap and swap activities of
broker-dealers, including broker-dealer SBSDs and MSBSPs. With respect
to stand-alone SBSDs, stand-alone MSBSPs, bank SBSDs, and bank MSBSPs,
the Commission is adopting new Rule 18a-6--which is modeled on Rule
17a-4, as amended. Rule 18a-6 does not include a parallel requirement
for every requirement in Rule 17a-4, and the recordkeeping requirements
in Rule 18a-6 applicable to bank SBSDs and MSBSPs are more limited in
scope than the requirements in the rule applicable to stand-alone SBSDs
and MSBSPs. As discussed above, the records a broker-dealer, including
a broker-dealer SBSD or MSBSP, is required to maintain and preserve
under Rules 17a-3 and 17a-4 may be maintained and preserved by means of
electronic storage media. The use of electronic storage media is
subject to certain conditions, including that the media must preserve
the records exclusively in a non-rewriteable and non-erasable format.
In response to comment, the Commission is modifying Rule 18a-6 to
eliminate the requirement that the electronic storage system preserve
the records exclusively in a non-rewriteable and non-erasable
format.\575\ The amendments to Rule 17a-4 and new Rule 18a-6 establish
a number of new collections of information, as summarized in the table
below.
---------------------------------------------------------------------------

    \575\ See Rule 18a-6, as adopted.

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                                                                                Non-model                                       Non-model
                                                                    Stand-alone    broker-dealer    ANC broker-    Broker-dealer    stand-alone    Model stand-     Bank SBSDs      Stand-alone
                                                                  broker-dealers       SBSDs       dealer SBSDs       MSBSPs           SBSDs        alone SBSDs                       MSBSPs
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                                                                  Records to be preserved for a period of not less than 6 years
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Trade blotters..................................................  ..............  ..............  ..............  ..............     18a-6(a)(1)     18a-6(a)(1)     18a-6(a)(2)     18a-6(a)(1)
                                                                                citing 18a-     citing 18a-     citing 18a-     citing 18a-
                                                                                5(a)(1)         5(a)(1)         5(b)(1)         5(a)(1)
General ledger..................................................  ..............  ..............  ..............  ..............     18a-6(a)(1)     18a-6(a)(1)  ..............     18a-6(a)(1)
                                                                                citing 18a-     citing 18a-                     citing 18a-
                                                                                5(a)(2)         5(a)(2)                         5(a)(2)
Ledgers for customer and non-customer accounts..................  ..............  ..............  ..............  ..............     18a-6(a)(1)     18a-6(a)(1)     18a-6(a)(2)     18a-6(a)(1)
                                                                                citing 18a-     citing 18a-     citing 18a-     citing 18a-
                                                                                5(a)(3)         5(a)(3)         5(b)(2)         5(a)(3)
Stock record....................................................  ..............  ..............  ..............  ..............     18a-6(a)(1)     18a-6(a)(1)     18a-6(a)(2)     18a-6(a)(1)
                                                                                citing 18a-     citing 18a-     citing 18a-     citing 18a-
                                                                                5(a)(4)         5(a)(4)         5(b)(3)         5(a)(4)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Records to be preserved for a period of not less than 3 years
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Memoranda of brokerage orders...................................  ..............  ..............  ..............  ..............  ..............  ..............           18a-6  ..............
                                                                                (b)(2)(i)
                                                                                citing 18a-
                                                                                5(b)(4)
Memoranda of proprietary orders.................................  ..............  ..............  ..............  ..............           18a-6           18a-6           18a-6           18a-6
                                                                                (b)(1)(i)       (b)(1)(i)       (b)(2)(i)       (b)(1)(i)
                                                                                citing 18a-     citing 18a-     citing 18a-     citing 18a-
                                                                                5(a)(5)         5(a)(5)         5(b)(5)         5(a)(5)
Confirmations...................................................  ..............  ..............  ..............  ..............           18a-6           18a-6           18a-6           18a-6
                                                                                (b)(1)(i)       (b)(1)(i)       (b)(2)(i)       (b)(1)(i)
                                                                                citing 18a-     citing 18a-     citing 18a-     citing 18a-
                                                                                5(a)(6)         5(a)(6)         5(b)(6)         5(a)(6)
Accountholder information.......................................  ..............  ..............  ..............  ..............           18a-6           18a-6           18a-6           18a-6
                                                                                (b)(1)(i)       (b)(1)(i)       (b)(2)(i)       (b)(1)(i)
                                                                                citing 18a-     citing 18a-     citing 18a-     citing 18a-
                                                                                5(a)(7)         5(a)(7)         5(b)(7)         5(a)(7)
Options positions...............................................  ..............  ..............  ..............  ..............           18a-6           18a-6  ..............           18a-6
                                                                                (b)(1)(i)       (b)(1)(i)                       (b)(1)(i)
                                                                                citing 18a-     citing 18a-                     citing 18a-
                                                                                5(a)(8)         5(a)(8)                         5(a)(8)
Trial balances and computation of net capital...................     17a-4(b)(1)     17a-4(b)(1)     17a-4(b)(1)     17a-4(b)(1)           18a-6           18a-6  ..............           18a-6
                                                                     citing 17a-     citing 17a-     citing 17a-     citing 17a-       (b)(1)(i)       (b)(1)(i)                       (b)(1)(i)
                                                                        3(a)(11)        3(a)(11)        3(a)(11)        3(a)(11)     citing 18a-     citing 18a-                     citing 18a-
                                                                                5(a)(9)         5(a)(9)                         5(a)(9)
Account equity and margin calculations under new Rule 18a-3.....  ..............     17a-4(b)(1)     17a-4(b)(1)     17a-4(b)(1)           18a-6           18a-6  ..............           18a-6
                                                                                citing 17a-     citing 17a-     citing 17a-       (b)(1)(i)       (b)(1)(i)                       (b)(1)(i)
                                                                                3(a)(25)        3(a)(25)        3(a)(25)     citing 18a-     citing 18a-                     citing 18a-
                                                                                5(a)(12)        5(a)(12)                        5(a)(12)

Possession or control requirements for security-based swap           17a-4(b)(1)     17a-4(b)(1)     17a-4(b)(1)     17a-4(b)(1)           18a-6           18a-6           18a-6  ..............
 customers......................................................     citing 17a-     citing 17a-     citing 17a-     citing 17a-       (b)(1)(i)       (b)(1)(i)       (b)(2)(i)
                                                                        3(a)(26)        3(a)(26)        3(a)(26)        3(a)(26)     citing 18a-     citing 18a-     citing 18a-
                                                                                5(a)(13)        5(a)(13)         5(b)(9)
Security-based swap customer reserve requirements...............     17a-4(b)(1)     17a-4(b)(1)     17a-4(b)(1)     17a-4(b)(1)           18a-6           18a-6           18a-6  ..............
                                                                     citing 17a-     citing 17a-     citing 17a-     citing 17a-       (b)(1)(i)       (b)(1)(i)       (b)(2)(i)
                                                                        3(a)(27)        3(a)(27)        3(a)(27)        3(a)(27)     citing 18a-     citing 18a-     citing 18a-
                                                                                5(a)(14)        5(a)(14)        5(b)(10)
Unverified transactions.........................................  ..............     17a-4(b)(1)     17a-4(b)(1)     17a-4(b)(1)           18a-6           18a-6           18a-6           18a-6
                                                                                citing 17a-     citing 17a-     citing 17a-       (b)(1)(i)       (b)(1)(i)       (b)(2)(i)       (b)(1)(i)
                                                                                3(a)(28)        3(a)(28)        3(a)(28)     citing 18a-     citing 18a-     citing 18a-     citing 18a-
                                                                                5(a)(15)        5(a)(15)        5(b)(11)        5(a)(15)
Political contributions.........................................  ..............     17a-4(b)(1)     17a-4(b)(1)  ..............           18a-6           18a-6           18a-6  ..............
                                                                                citing 17a-     citing 17a-                       (b)(1)(i)       (b)(1)(i)       (b)(2)(i)
                                                                                3(a)(29)        3(a)(29)                     citing 18a-     citing 18a-     citing 18a-
                                                                                5(a)(16)        5(a)(16)        5(b)(12)
Compliance with business conduct requirements...................  ..............     17a-4(b)(1)     17a-4(b)(1)     17a-4(b)(1)           18a-6           18a-6           18a-6           18a-6
                                                                                citing          citing          citing       (b)(1)(i)       (b)(1)(i)       (b)(2)(i)       (b)(1)(i)
                                                                                17a[dash]3(a)(  17a[dash]3(a)(  17a[dash]3(a)(     citing 18a-     citing 18a-     citing 18a-     citing 18a-
                                                                                30)             30)             30)        5(a)(17)        5(a)(17)        5(b)(13)        5(a)(17)