[Federal Register Volume 80, Number 157 (Friday, August 14, 2015)]
[Rules and Regulations]
[Pages 48963-49079]
[FR Doc No: 2015-19661]

Vol. 80

Friday,

No. 157

August 14, 2015

Part II

 Securities and Exchange Commission

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17 CFR Parts 240 and 249

 Registration Process for Security-Based Swap Dealers and Major
Security-Based Swap Participants; Final Rule

Federal Register / Vol. 80 , No. 157 / Friday, August 14, 2015 /
Rules and Regulations

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 240 and 249

[Release No. 34-75611; File No. S7-40-11]
RIN 3235-AL05

Registration Process for Security-Based Swap Dealers and Major
Security-Based Swap Participants

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: The Securities and Exchange Commission (the ``Commission'') is
adopting new Rules 15Fb1-1 through 15Fb6-2 and Forms SBSE, SBSE-A,
SBSE-BD, SBSE-C and SBSE-W in accordance with Section 15F of the
Securities Exchange Act of 1934 (the ``Exchange Act''). Section 15F,
which was added to the Exchange Act by Section 764(a) of Title VII of
the Dodd-Frank Wall Street Reform and Consumer Protection Act (``Dodd-
Frank Act''), requires the Commission to issue rules to provide for the
registration of security-based swap dealers (``SBS Dealers'') and major
security-based swap participants (``Major SBS Participants'')
(collectively, ``SBS Entities''). These new rules and forms establish a
process by which SBS Entities can register (and withdraw from
registration) with the Commission.

DATES: Effective Date: October 13, 2015.
    Compliance Date: The later of: Six months after the date of
publication in the Federal Register of a final rule release adopting
rules establishing capital, margin and segregation requirements for SBS
Entities; the compliance date of final rules establishing recordkeeping
and reporting requirements for SBS Entities; the compliance date of
final rules establishing business conduct requirements under Exchange
Act Sections 15F(h) and 15F(k); or the compliance date for final rules
establishing a process for a registered SBS Entity to make an
application to the Commission to allow an associated person who is
subject to a statutory disqualification to effect or be involved in
effecting security-based swaps on the SBS Entity's behalf.
    Counting Date: For purposes of complying with the registration and
other requirements, persons are not required to begin calculating
whether their activities meet or exceed the thresholds established in
Exchange Act Rules 3a71-2, 3a67-3, and 3a67-5 until two months prior to
the Compliance Date of these rules.

FOR FURTHER INFORMATION CONTACT: Paula Jenson, Deputy Chief Counsel;
Joseph Furey, Assistant Chief Counsel; Bonnie Gauch, Senior Special
Counsel; Joanne Rutkowski, Senior Special Counsel; or Jonathan Shapiro,
Special Counsel;<PHONE_NUMBER>; Division of Trading and Markets,
Securities and Exchange Commission, 100 F Street NE., Washington, DC
20549-7010.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background
    A. Dodd-Frank Act
    B. Proposed Rules
    C. Comments Received
    D. Summary of Final Rules
II. Final Exchange Act Rules and Forms
    A. Registration Application and Amendment
    1. Rule 15Fb2-1
    i. Form of Application
    ii. Senior Officer Certification
    iii. Conditional Registration
    iv. Electronic Filing and Completeness of the Application
    v. Standards for Granting or Initiating Proceedings to Determine
Whether to Deny Registration
    vi. Comments on Substituted Compliance
    2. Amendments to Form SBSE, Form SBSE-A, and Form SBSE-BD: Rule
15Fb2-3
    B. Associated Persons
    1. Associated Person Certification
    i. Associated Person Entities
    ii. Involved in Effecting Transactions
    iii. Licensing
    2. Questionnaire or Application for Employment and Background
Checks
    3. Final Rule for Associated Person Certification
    C. Termination of Registration
    1. Duration of Registration: Rule 15Fb3-1
    2. Withdrawal: Rule 15Fb3-2
    3. Cancellation and Revocation: Rule 15Fb3-3
    D. Special Requirements for Nonresident SBS Entities
    1. Definition of Nonresident SBS Entities
    2. United States Agent for Service of Process
    3. Access to Books and Records, and Onsite Inspections and
Examinations, of Nonresident SBS Entities
    E. Special Situations
    1. Succession: Rule 15Fb2-5
    2. Insolvency: Rule 15Fb2-6
    F. Electronic Signatures
    G. Forms
    1. Form SBSE
    2. Form SBSE-A
    3. Form SBSE-BD
    4. Form SBSE-C
    5. Form SBSE-W
III. Explanation of Dates
    A. Effective Date
    B. Registration Compliance Date
    C. SBS Entity Counting Date
IV. Paperwork Reduction Act
    A. Summary of Collection of Information
    B. Proposed Use of Information
    C. Respondents
    D. Total Initial and Annual Reporting and Recordkeeping Burdens
    1. Burden Associated With Filing Application Forms
    2. Burden Associated With Amending Application Forms
    3. Burdens Relating to Associated Persons
    4. Burdens on Nonresident SBS Entities
    5. Burden Related to Retention of Manually Signed Signature
Pages
    6. Burden Associated With Filing Withdrawal Form
    E. Retention Period of Recordkeeping Requirements
    F. Collection of Information Is Mandatory
    G. Confidentiality
V. Economic Analysis
    A. Introduction and Broad Economic Considerations
    B. Baseline
    1. Current Security-Based Swap Market
    i. Dealing Structures and Participant Domiciles
    ii. Market Centers
    iii. Current Estimates of Number of SBS Dealers and Major SBS
Participants
    2. Levels of Security-Based Swap Trading Activity
    3. Cross-Market Participation
    4. Statutory Disqualification
    C. Benefits of Registration
    1. Direct Benefits
    i. Disciplinary History and Other Information
    ii. Statutory Disqualification
    iii. Senior Officer Certification and Nonresident Entity
Certification
    iv. Other Direct Benefits
    2. Indirect Benefits
    D. Costs of Registration
    1. Direct Compliance Costs
    2. Other Direct Costs
    i. Costs Related to the Disciplinary History Disclosure
Requirement
    ii. Costs Related to Certifications
    iii. Costs Related to the Associated Person Requirements
    iv. Costs for Nonresident SBS Entities
    2. Indirect Costs
    E. Effects on Efficiency, Competition, and Capital Formation
    F. Registration Rule Alternatives
    1. Associated Person Certification Requirement
    2. Licensing, Control Affiliates and CCO Certification Regarding
Associated Persons
    3. Requirements on Nonresidents
    4. Other Considerations
VI. Regulatory Flexibility Act Certification
VII. Statutory Basis

I. Background

A. Dodd-Frank Act

    Section 764 of the Dodd-Frank Act added Section 15F to the Exchange
Act to require the Commission to adopt rules to provide for
registration of SBS Entities. Section 15F(a) of the Exchange Act
prohibits any person from acting as a ``security-based swap dealer''
\1\ or

``major security-based swap participant'' \2\ without being registered
with the Commission.\3\ Section 15F(b)(1) further states that a person
``shall register as a security-based swap dealer or major security-
based swap participant by filing a registration application with the
Commission,'' and Section 15F(b)(2)(A) states that ``[t]he application
shall be made in such form and manner as prescribed by the Commission,
and shall contain such information, as the Commission considers
necessary concerning the business in which the applicant is or will be
engaged.'' In addition, Section 15F(d)(1) of the Exchange Act directs
the Commission to ``adopt rules for persons that are registered as [SBS
Entities] under [Section 15F].''
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    \1\ See Exchange Act Section 3(a)(71)(A) [15 U.S.C. 78c(71)(A)]
and Rule 3a71-1 [17 CFR 240.3a71-1]. See also, Further Definition of
``Swap Dealer,'' ``Security-Based Swap Dealer,'' ``Major Swap
Participant,'' ``Major Security-Based Swap Participant'' and
``Eligible Contract Participant,'' Exchange Act Release No. 66868
(Apr. 27, 2012), 77 FR 30596 (May 23, 2012) (``Intermediary
Definitions Adopting Release'') and Application of ``Security-Based
Swap Dealer'' and ``Major Security-Based Swap Participant''
Definitions to Cross-Border Security-Based Swap Activities, Exchange
Act Release No. 72472 (Jun. 25, 2014), 79 FR 47278 (Aug. 12, 2014)
(``Cross-Border Adopting Release'').
    \2\ See Exchange Act Section 3(a)(67)(A) [15 U.S.C. 78c(67)(A)]
and Rule 3a67-1 [17 CFR 240.3a67-1]. See also, the Intermediary
Definitions Adopting Release and Cross-Border Adopting Release.
    \3\ 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 (Jun. 15, 2011), 76 FR 36287,
36299-300 (Jun. 22, 2011) (the ``Effective Date Release'').
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B. Proposed Rules

    The Commission proposed new rules 15Fb1-1 through 15Fb6-1 and Forms
SBSE, SBSE-A, SBSE-BD, SBSE-C, and SBSE-W to establish a process by
which SBS Entities could register (and withdraw from registration) with
the Commission.\4\ As described in the Registration Proposing Release,
this process was designed to be comprehensive, and included, among
other things: (1) A requirement to amend an inaccurate application for
registration; (2) procedures for succession to, or withdrawal from,
registration; (3) procedures for the Commission to cancel or revoke
registration; (4) a requirement for an SBS Entity to certify that none
of its associated persons that effect, or are involved in effecting,
security-based swaps on the SBS Entity's behalf is subject to statutory
disqualification; and (5) special requirements applicable to
nonresident SBS Entities relating to service of process, opinion of
counsel, Commission access to documents and Commission onsite
examinations.
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    \4\ Registration of Security-Based Swap Dealers and Major
Security-Based Swap Participants, Exchange Act Release No. 65543
(Oct. 12, 2011), 76 FR 65784 (Oct. 24, 2011) (the ``Registration
Proposing Release'').
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    The Commission re-proposed Forms SBSE, SBSE-A, and SBSE-BD in May
2013.\5\ Among other things, the re-proposed Forms provide registrants
with a method to provide the Commission with information regarding the
registrant's intent to rely on a substituted compliance determination
by the Commission with respect to those requirements in Exchange Act
Section 15F and the rules and regulations thereunder for which the
Commission determines that substituted compliance may be available.
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    \5\ See Cross-Border Security-Based Swap Activities; Re-Proposal
of Regulation SBSR and Certain Rules and Forms Relating to the
Registration of Security-Based Swap Dealers and Major Security-Based
Swap Participants, Exchange Act Release No. 69490 (May 1, 2013), 78
FR 30968 (May 23, 2013) (``Cross-Border Proposing Release'').
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    In general, the proposed rules would have required an SBS Entity to
register with the Commission by filing either Form SBSE, Form SBSE-A,
or Form SBSE-BD, as appropriate, electronically. The Commission would
have then either granted conditional registration to the SBS Entity or
initiated proceedings to deny registration. Once all of the substantive
requirements applicable to SBS Entities were adopted by the Commission,
the SBS Entity would have been required to electronically file Form
SBSE-C, a certification signed by a knowledgeable senior officer
stating that, to the best of that person's knowledge the SBS Entity had
the operational, financial, and compliance capabilities to act as an
SBS Dealer or Major SBS Participant, as appropriate. Upon receipt of
that certification, the Commission would have either granted ongoing
registration or instituted proceedings to deny such registration.
    The Commission's proposed registration requirements for SBS
Entities were largely modeled after the registration regime applicable
to broker-dealers,\6\ while also taking into account the Commodity
Futures Trading Commission's (CFTC's) registration requirements for
intermediaries.\7\ This approach was designed to both ease the
regulatory burden on market participants that register as both an SBS
Entity and a broker-dealer by establishing a consistent and
complementary registration regime, and to avoid unnecessary duplication
by permitting SBS Entities that are otherwise registered or registering
as intermediaries with either the Commission or the CFTC to complete
simplified application forms.
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    \6\ This includes rules promulgated under Sections 15(b) and
17(a) of the Exchange Act.
    \7\ 17 CFR 3.1 et. seq. Futures commission merchants (``FCMs'')
and introducing brokers presently register with the CFTC by filing
Form 7-R with the National Futures Association (``NFA''). On January
11, 2012, the CFTC issued final rules requiring swap dealers and
major swap participants to become and remain members of a registered
futures association (the NFA is presently the only registered
futures association) and amending Rule 3.10 to include swap dealers
and major swap participants to the list of entities that must
register by filing Form 7-R with the NFA. Registration of Swap
Dealers and Major Swap Participants, 77 FR 2613 (Jan. 19, 2012) (the
``CFTC Final Registration Rules''). At the same time, the CFTC
delegated to NFA the authority to process swap dealer and major swap
participant registration applications. See Performance of
Registration Functions by National Futures Association With Respect
To Swap Dealers and Major Swap Participants, 77 FR 2708 (Jan. 19,
2012).
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C. Comments Received

    In the Registration Proposing Release, the Commission requested
comment on all aspects of the proposal, including specific questions
and a number of more general requests. The Commission originally
received four comment letters in response to the proposed rules and
forms.\8\ The Commission later received 31 additional comment letters
in response to the reopening of comment periods for certain proposals
applicable to security-based swaps.\9\ Of those comment letters, one
letter (from six industry groups) requested an extension of time to
provide comment, and six specifically commented on the proposed
registration process and forms.\10\
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    \8\ Comments were received from Chris Barnard of Germany, dated
Oct. 24, 2011 (the ``2011 Barnard Letter''); the Securities Industry
and Financial Markets Association, dated Dec. 16, 2011 (the ``SIFMA
Letter''); and Better Markets, Inc., dated Dec. 19, 2011 (the ``2011
Better Markets Letter''). One other comment letter directed to the
Registration Proposing Release file did not address the content of
that release.
    \9\ Reopening of Comment Periods for Certain Rulemaking Releases
and Policy Statement Applicable to Security-Based Swaps Proposed
Pursuant to the Securities Exchange Act of 1934 and the Dodd-Frank
Wall Street Reform and Consumer Protection Act, Exchange Act Release
No. 69491 (May 1, 2013), 78 FR 30800 (May 23, 2013) (``Release
Reopening the Comment Period'').
    \10\ See letters from: The Association of Financial Guaranty
Insurers, dated Jul. 22, 2013 (the ``AFGI Letter''); Better Markets,
Inc., dated Jul. 22, 2013 (the ``2013 Better Markets Letter''); the
Institute of International Finance, dated Aug. 8, 2013 (the ``IIF
Letter''); the Institute of International Bankers, dated Aug. 21,
2013 (the ``IIB Letter''); the European Commission, dated Aug. 21,
2013 (the ``EC Letter''); and Nomura Global Financial Products,
Inc., dated September 10, 2014 (the ``Nomura Letter'').
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    The Commission also received 38 comment letters in response to the
Cross-Border Proposing Release, which re-proposed Regulation SBSR and
certain rules and forms relating to the registration of SBS
Entities.\11\ Of those,

three commented on the proposed registration process and forms.\12\
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    \11\ Twenty-five persons submitted the same comment letter in
response to both the Release Reopening the Comment Period and the
Cross-Border Proposing Release.
    \12\ All of those persons submitted the same letter to both the
Release Reopening the Comment Period and the Cross-Border Proposing
Release. These include the IIF Letter, the IIB Letter, and the EC
Letter.
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    While commenters generally supported the proposed rules, a few
raised various concerns, including whether a senior officer
certification should be required; whether the Commission should require
an independent pre-registration review of applicants; whether the
Commission should require that SBS Entities investigate their
associated persons; and whether nonresident applicants should be
required to provide an opinion of counsel as to whether they can
provide records to the Commission and allow the Commission to inspect
them. Many commenters, while not commenting on the registration
process, generally commented that the Commission should model its rules
on those adopted by the CFTC in order to reduce the impact on market
participants.

D. Summary of Final Rules

    The registration rules and Forms the Commission is adopting today
largely follow those proposed, with certain modifications.\13\ In
particular, as explained more fully below, we are adopting the
following rules:\14\
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    \13\ The Commission asked questions regarding limited
registration in the Registration Proposing Release. See Registration
Proposing Release, 76 FR at 65795, questions 62 through 66. We
received one comment on this issue, which contended that ``the
Commission should allow for limited designation and registration,
including by trading unit, type of activity and type of
counterparty.'' See the SIFMA Letter, at 10-11. The Commission later
adopted Rule 3a71-1(c), in the Intermediary Definitions Adopting
Release, to provide that ``a person that is a security-based swap
dealer in general shall be deemed to be a security-based swap dealer
with respect to each security-based swap it enters into, regardless
of the type, class, or category of the security-based swap or the
person's activities in connection with the security-based swap,
unless the Commission limits the person's designation as a security-
based swap dealer to specified types, classes, or categories of
security-based swaps or specified activities of the person in
connection with security-based swaps.'' In that release, the
Commission and the CFTC stated that the SEC expects to address the
process for submitting an application for limited designation as a
security-based swap dealer, along with principles to be used by the
Commission in analyzing such applications, as part of separate
rulemakings. See Intermediary Definitions Adopting Release, footnote
573. The Commission has not yet addressed a process through which
firms could submit an application for limited designation as a
security-based swap dealer. In order to evaluate a process for
limited registration, the Commission would need to consider how the
substantive rules should be applied to entities that might be
subject to limited designations. In light of the fact that the
Commission has not yet adopted all rules implementing the Title VII
regime that may affect how firms structure their security-based swap
business and market practices more generally, the Commission is not
addressing limited designation at this time.
    \14\ If any provision of these rules, or the application thereof
to any person or circumstance, is held to be invalid, such
invalidity shall not affect other provisions or application of such
provisions to other persons or circumstances that can be given
effect without the invalid provision or application.
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     Rule 15Fb1-1 specifies the format and certain requirements
for signatures to electronic submissions (including signatures within
the forms and certifications required by Rules 15Fb2-1, 15Fb2-4 and
15Fb6-2, discussed below).
     Rule 15Fb2-1 describes the process through which an SBS
Entity can apply for registration with the Commission. This Rule
identifies the Form of application various types of entities must use
to register, how such application must be filed, and the standard the
Commission will use to determine whether to grant registration. Under
Rule 15Fb2-1, an application for registration of an SBS Entity must be
filed on Form SBSE, Form SBSE-A or Form SBSE-BD, as appropriate. An
applicant also must file Form SBSE-C as part of its application, which
includes two separate certifications. One of those certifications,
provided for in Rule 15Fb2-1(b), requires a senior officer of the
applicant to certify that, after due inquiry, he or she has reasonably
determined that the applicant has developed and implemented written
policies and procedures reasonably designed to prevent violations of
the federal securities laws and the rules thereunder, and that he or
she has documented the process by which he or she reached such
determination (the ``Senior Officer Certification'').
     Rule 15Fb2-3 requires an SBS Entity to promptly file an
amendment where the information contained in its Form SBSE, Form SBSE-
A, or Form SBSE-BD, as applicable, or in any amendment thereto, is or
has become inaccurate for any reason.
     Rule 15Fb2-4 requires that nonresident SBS Entities obtain
a U.S. agent for service of process and an opinion of counsel
determining that they can, as a matter of law, provide the Commission
with access to their books and records and submit to onsite
examination. Rule 15Fb2-4 also requires that, as part of their
applications, these entities provide the Commission with information
regarding their agent for service of process and certify that they can,
as a matter of law, and will provide the Commission with access to
their books and records and submit to onsite examination.
     Rule 15Fb2-5 provides a process through which an SBS
Entity may succeed to the business of another SBS Entity.
     Rule 15Fb2-6 provides a process through which an executor,
administrator, guardian, conservator, assignee for the benefit of
creditors, receiver, trustee in insolvency or bankruptcy or other
fiduciary appointed or qualified by order, judgment or decree of a
court of competent jurisdiction may continue the business of an SBS
Entity.
     Rule 15Fb3-1 concerns the duration of registration and
provides that an SBS Entity will continue to be registered until the
effective date of any cancellation, revocation or withdrawal of
registration.
     Rule 15Fb3-2 provides a process by which an SBS Entity may
withdraw from registration with the Commission.
     Rule 15Fb3-3 provides a process by which the Commission
may cancel or revoke the registration of an SBS Entity.
     Rule 15Fb6-1 provides that unless otherwise ordered by the
Commission, when it files an application to register with the
Commission as an SBS Dealer or Major SBS Participant, an SBS Entity may
permit a person that is associated with it that is not a natural person
and that is subject to statutory disqualification to effect or be
involved in effecting security-based swaps on its behalf, provided that
the statutory disqualification(s), described in Sections 3(a)(39)(A)
through (F) of the Securities Exchange Act of 1934 (15 U.S.C.
78c(a)(39)), occurred prior to the compliance date of this rule, and
provided that it identifies each such associated person on Schedule C
of Form SBSE (Sec.  249.1600 of this chapter), Form SBSE-A (Sec.
249.1600a of this chapter), or Form SBSE-BD (Sec.  249.1600b of this
chapter), as appropriate.
     Rule 15Fb6-2 requires that the Chief Compliance Officer
(``CCO'') of an SBS Entity certify on Form SBSE-C that it neither
knows, nor in the exercise of reasonable care should have known, that
any person associated with it who effects or is involved in effecting
security-based swaps on its behalf is subject to statutory
disqualification, unless otherwise specifically provided by rule,
regulation or order of the Commission (the ``CCO Certification
Regarding Associated Persons''). This rule also requires that to
support the certification, the CCO, or his or her designee, review and
sign the questionnaire or application for employment executed by each
of the

SBS Entity's associated persons who are natural persons and effect or
are involved in effecting security-based swaps on behalf of the SBS
Entity.
    In addition, the Commission is adopting the following forms:
     Form SBSE-BD, the registration form for SBS Entities
registered or registering with the Commission as broker-dealers;
     Form SBSE-A, the registration form for SBS Entities
registered or registering with the CFTC as swap dealers or major swap
participants (and not also registered or registering with the
Commission as broker-dealers);
     Form SBSE, the registration form for SBS Entities that do
not fit either of the above categories;
     Form SBSE-C, the certification form for SBS entity
applicants containing the Senior Officer Certification required by Rule
15Fb2-1(b) and the CCO Certification Regarding Associated Persons
required by Rule 15Fb6-2(a).
     Form SBSE-W, the form that SBS Entities would file for
notice of withdrawal from registration.
    The Commission is not adopting proposed Rule 15Fb2-2T, which would
have required SBS Entities, among other things, to file their
applications in paper form, because the EDGAR system will be updated to
receive these application Forms before the effective date of these
rules.\15\
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    \15\ See infra, Section II.A.1.iv.
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    In developing these rules and forms, Commission staff consulted and
coordinated with the CFTC and the prudential regulators.\16\
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    \16\ Section 712(a)(2) of the Dodd-Frank Act provides in part
that the Commission shall ``consult and coordinate to the extent
possible with the Commodity Futures Trading Commission and the
prudential regulators for the purpose of assuring regulatory
consistency and comparability, to the extent possible.''
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II. Final Exchange Act Rules and Forms

A. Registration Application and Amendment

1. Rule 15Fb2-1
    Rule 15Fb2-1, as adopted, describes the process through which an
SBS Entity will apply for registration with the Commission. As set
forth in the rule, each SBS Entity will complete and submit an
application Form electronically. The Rule also requires that a senior
officer of the SBS Entity must certify, on Form SBSE-C, that, after due
inquiry, he or she has reasonably determined that the SBS Entity has
developed and implemented written policies and procedures reasonably
designed to prevent violations of the federal securities laws and the
rules thereunder, and that he or she has documented the process by
which he or she reached such determination. In addition, the rule
prescribes the timing of such filings and the standard of review that
will be applied by the Commission in determining whether to grant
registration or institute proceedings to deny registration. While it
may be appropriate for certain rules applicable to SBS Dealers to
differ from those applicable to Major SBS Participants, the Commission
believes that the registration rules and forms need not differ because
the of information the Commission will need to review to determine
whether to grant registration or institute proceedings to deny such
registration is similar for both types of entities.
i. Form of Application
    As proposed, paragraph (a) of Rule 15Fb2-1 provided that an SBS
Entity could apply for registration by filing either Form SBSE, Form
SBSE-A, or Form SBSE-BD. The Commission proposed three separate Forms
to recognize that, if an entity is already registered with the
Commission or the CFTC, the Commission can otherwise access certain
information on that registrant.\17\
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    \17\ The Commission will be able to access information on
registered broker-dealers through its access to the CRD system. Form
SBSE-A, which would apply to entities already registered with the
CFTC, requires that firms filing that form also submit a copy of the
Form 7-R they file with NFA. See 17 CFR 3.10(a) (which generally
requires that ``application for registration as a futures commission
merchant, retail foreign exchange dealer, swap dealer, major swap
participant, introducing broker, commodity pool operator, commodity
trading advisor, or leverage transaction merchant must be on Form 7-
R, completed and filed with the NFA in accordance with the
instructions thereto''). See also supra, footnote 7.
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    As proposed, an SBS Entity that has filed Form BD via FINRA's
Central Registration Depository (or ``CRD'') system to register as a
broker-dealer would be able to use Form SBSE-BD to register with the
Commission as an SBS Entity. Similarly, an SBS Entity that has filed
Form 7-R with the CFTC (or its designee) to register as a swap dealer
or major swap participant would be able to use Form SBSE-A to register
with the Commission as an SBS Entity.\18\ All others would be required
to use Form SBSE to register with the Commission as an SBS Entity. Form
SBSE is, necessarily, a longer form because the entities using it would
not have already submitted any of the requisite information the
Commission can otherwise access. In the Cross-Border Proposing Release,
the Commission re-proposed these registration forms to add questions
relating to substituted compliance.\19\
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    \18\ According to the instructions on Form SBSE-A, the applicant
would also need to attach a copy of the Form 7-R they filed with NFA
to the Form SBSE-A.
    \19\ See supra, footnote 5 and accompanying text.
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    In general, commenters supported the application of SBS Entities
via the use of these multiple Forms.\20\ The Commission is adopting
paragraph (a) of Rule 15Fb2-1, as proposed, with two modifications. We
have added a sentence stating that applicants shall also file as part
of their application the required certifications on Form SBSE-C (Sec.
249.1600c of this chapter). This is designed to clarify that the
application for registration includes the certifications.\21\ We also
made a technical change to increase the precision of paragraph (a) of
Rule 15Fb2-1 by replacing the phrase ``in accordance with this
section'' with the phrase ``in accordance with paragraph (c)'' because
paragraph (c) specifies the method by which applicants must file their
application forms.\22\
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    \20\ See 2011 Barnard Letter, at 3 and SIFMA Letter, at 4.
    \21\ As discussed in more detail in Section II.A.iii. below, the
requirement that an applicant file the certifications on Form SBSE-C
at the same time they file an application on Form SBSE, SBSE-A, or
SBSE-BD, as appropriate, facilitates conditional registration upon
filing, which is designed to assure that existing entities are not
required to cease operations pending the Commission's consideration
of their application. We have also moved the CCO Certification
Regarding Associated Persons, which had been included as Schedule G
to the Forms, into Form SBSE-C. As proposed, that certification
would have been required to be provided as part of Forms SBSE, SBSE-
A, and SBSE-BD.
    \22\ See infra, Section II.G. for a discussion of the
information required on each of the Forms.
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ii. Senior Officer Certification
    Proposed Rule 15Fb2-1(b)(1) and Form SBSE-C would have required
that a knowledgeable senior officer of the SBS Entity certify that,
after due inquiry, he or she has reasonably determined that the SBS
Entity has the operational, financial, and compliance capabilities to
act as an SBS Entity. In addition, the proposed Rule would have
required that the senior officer certify that he or she had documented
the process by which he or she reached that determination.\23\
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    \23\ As proposed, this was a one-time certification (see
Registration Proposing Release, 76 FR at 65810), where a senior
officer would be certifying as to the SBS Entity's capabilities at
the time of the certification (see Registration Proposing Release,
at 65789-91).
---------------------------------------------------------------------------

    Two commenters took issue with the proposed Senior Officer
Certification.\24\

One commenter indicated that it believes the Senior Officer
Certification is unnecessary, overly burdensome, and unduly vague and
indeterminate.\25\ This commenter pointed out that the untested nature
of the Dodd-Frank regulatory regime would make it difficult for any
senior officer to confidently or meaningfully certify that an SBS
Entity would have the necessary capabilities.\26\ Both commenters
contended that the Commission had not adequately defined ``operational,
financial, and compliance capabilities'' nor what constitutes ``due
inquiry.'' \27\ Further, one of the commenters suggested that, as an
alternative, the Commission require a ``policies and procedures''-type
certification, such as that set forth in Question 21 to the
Registration Proposing Release.\28\
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    \24\ See, e.g., SIFMA Letter, at 5-7; 2011 and the Better
Markets Letter, at 5-6.
    \25\ See, e.g., SIFMA Letter, at 5-7.
    \26\ See, e.g., SIFMA Letter, at 5.
    \27\ See supra, footnote 24.
    \28\ See SIFMA Letter, at 6; and Registration Proposing Release,
76 FR at 65791. In pertinent part, Question 21 asks, ``Should the
Senior Officer Certification instead require that a senior officer
certify that `to the best of his or her knowledge, after due
inquiry, the security-based swap dealer or major security-based swap
participant has developed and implemented written policies and
procedures reasonably designed to prevent violation of federal
securities laws, the rules thereunder, and applicable self-
regulatory organization rules?' ''
---------------------------------------------------------------------------

    As more fully discussed below, after considering the comments, we
believe that we can still achieve the objective of the Senior Officer
Certification, while avoiding undue uncertainty over what the senior
officer is certifying to, by adopting a certification requirement
similar to the one articulated in Question 21 in the Registration
Proposing Release.
    Specifically, the Senior Officer Certification requirement, as
adopted in Rule 15Fb2-1(b) and Form SBSE-C, requires that a senior
officer \29\ certify that: (1) After due inquiry, he or she has
reasonably determined that the security-based swap dealer or major
security-based swap participant has developed and implemented written
policies and procedures reasonably designed to prevent violation of
federal securities laws and the rules thereunder, and (2) he or she has
documented the process by which he or she reached such
determination.\30\ The language of this certification is similar to the
language in Question 21, and to the language that was supported by the
commenter.\31\ However, we retained the requirement for the senior
officer to have made a reasonable determination from the proposed
certification, and modified the language from what was presented in
Question 21 to eliminate the reference to ``applicable self-regulatory
organization rules'' because SBS Entities generally will not be subject
to those rules.\32\ In addition, we retained the proposed requirement
that the senior officer certify that he or she had documented the
process by which he or she reached his or her determination. We
received no comment on that aspect of the certification and believe it
would be helpful to the staff when performing examinations to assure
compliance with the certification requirement.
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    \29\ For purposes of this certification requirement, the term
``senior officer'' is intended to cover only the most senior
executives in the organization, such as an applicant's chief
executive officer, chief financial officer, chief legal officer,
chief compliance officer, president, or other person at a similar
level. Additionally, the person who signs the certification must
have the legal authority to bind the applicant.
    \30\ See Form SBSE-C, Certification 1. Similar to what was
proposed, this is a one-time certification, for purposes of
registration, where the senior officer certifies as to his or her
understanding of the SBS Entity's policies and procedures at the
time the certification is signed. While this certification is only
required at the time of initial registration, Exchange Act Section
15F(k)(2) establishes duties for a CCO which include, among other
things, a requirement that the CCO ensure compliance with Exchange
Act Section 15F and the regulations thereunder relating to security-
based swaps, including each rule prescribed by the Commission under
this section. In addition, the Commission has proposed rules that
would require each SBS Entity to establish, maintain and enforce a
system to supervise, and to supervise diligently, the business of
the SBS Entity involving security-based swaps. Those proposed rules
would require that this system be reasonably designed to achieve
compliance with applicable federal securities laws and the rules and
regulations thereunder. See Proposed Rule 15Fh-3(i). In addition,
the proposed rules would require that an SBS Entity establish,
maintain, and enforce written policies and procedures addressing the
types of business in which the security-based swap dealer or major
security-based swap participant is engaged that are reasonably
designed to achieve compliance with applicable securities laws and
the rules and regulations thereunder. See Proposed Rule 15Fh-
3(i)(2)(iii). The proposed rules also indicate that an SBS Entity
would not be deemed to have failed to diligently supervise any other
person if, among other things, it has established and maintained
written policies and procedures, and a documented system for
applying those policies and procedures, that would reasonably be
expected to prevent and detect, insofar as practicable, any
violation of the federal securities laws and the rules and
regulations thereunder relating to security-based swaps. See
Proposed Rule 15Fh-3(i)(3). See also, Business Conduct Standards for
Security-Based Swap Dealers and Major Security-Based Swap
Participants, Exchange Act Release No. 64766 (Jun. 29, 2011), 76 FR
42396 (Jul. 18, 2011) (the ``Business Conduct Standards Proposing
Release''), at 42419 through 42421.
    \31\ See supra, footnote 28.
    \32\ SBS Entities that are also registered as broker-dealers are
subject to the rules of a self-regulatory organization (``SRO'') of
which they are a member due to their being a registered broker-
dealer.
---------------------------------------------------------------------------

    We believe the certification standard that we are adopting in Rule
15Fb2-1(b) and Form SBSE-C is more concrete and understandable than the
one that we proposed.\33\ Thus, it should be easier for SBS Entities to
implement. Further, we believe that the Senior Officer Certification we
are adopting is reasonably designed to provide assurances that each SBS
Entity has put in place a framework to enable it to operate in
compliance with the applicable laws, rules and regulations. The
certification requirement should help to protect both investors and
markets from potential problems arising from SBS Entities that may have
not put in place a framework that enables them to operate their
security-based swap business in compliance with their regulatory
obligations.\34\ Specifically, we believe that receipt of the Senior
Officer Certification in Form SBSE-C, which requires that a senior
officer certify that he or she has reasonably determined that the SBS
Entity has developed and implemented written policies and procedures
reasonably designed to prevent violation of federal securities laws and
the rules thereunder, is further support that an SBS Entity has
undertaken a thorough review of applicable regulations, including any
rules adopted by the Commission relating to minimum operational,
financial, and compliance standards.\35\

In essence, this Senior Officer Certification is designed to help
assure that each SBS Entity has thought through what it needs to do to
be able to operate in compliance with those requirements applicable to
a registered SBS Entity under the federal securities laws (including
those related to operations, financial and compliance standards), and
has developed and implemented written policies and procedures
reasonably designed to prevent violation of those laws, rules, and
regulations.\36\
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    \33\ This standard is used in Exchange Act Section 15(b)(4)(E)
and we believe industry participants are familiar with it.
    \34\ See Registration Proposing Release, at 65789 through 65790.
    \35\ The Commission has separately proposed rules to establish
financial, operational and compliance standards for SBS Entities,
with which these entities would need to comply upon registration, if
the Commission were to adopt the proposed rules. In the Registration
Proposing Release, the Commission provided guidance regarding the
meaning of the terms operational capability (at footnote 26),
financial capability (at footnote 27), and compliance capability (at
footnote 28). In its guidance regarding operational capability (or
standards), the Commission stated that it expected ``that a key
foundation for the Senior Officer Certification would be the
capability of an SBS Entity to comply with the obligations that
would be imposed by the Trade Acknowledgment Proposing Release
[Trade Acknowledgment and Verification of Security-Based Swap
Transactions, Exchange Act Release No. 63727 (Jan. 14, 2011) (76 FR
3859, Jan. 21, 2011) (the ``Trade Acknowledgment Proposing
Release'')], if adopted, other legal obligations applicable to the
operations of an SBS Entity, and the capability of the SBS Entity to
conduct its business as represented in the SBS Entity's application
for ongoing registration. This would include rules proposed in
Recordkeeping and Reporting Requirements for Security-Based Swap
Dealers, Major Security-Based Swap Participants, and Broker-Dealers;
Capital Rule for Certain Security- Based Swap Dealers, Exchange Act
Release No. 71958, (Apr. 17, 2014) (79 FR 25194, May 2, 2014) (the
``Books and Records Proposing Release''). In its guidance regarding
financial capability, the Commission indicated that it would
separately propose capital rules for SBS Entities (See e.g.,
Capital, Margin, and Segregation Requirements for Security-Based
Swap Dealers and Major Security-Based Swap Participants and Capital
Requirements for Broker-Dealers, Exchange Act Release No. 68071
(Oct. 18, 2012), 77 FR 70214 (Nov. 23, 2012) (the ``Capital and
Margin Proposing Release''). In its guidance regarding compliance
capability, the Commission referenced the Business Conduct Standards
Proposing Release.
    \36\ In the Business Conduct Standards Proposing Release the
Commission proposed rules to prescribe business conduct standards
for SBS Entities, as authorized under Exchange Act Section 15F(h)
and 15F(k), including rules that relate to diligent supervision of
the business of the registered SBS Entity (provided for in Exchange
Act Section 15F(h)(1)(B)) and rules establishing the duties of the
SBS Entity's CCO (provided for in Exchange Act Section 15F(k)). The
Commission intends to clarify the obligations underlying these rules
when it adopts rules under Exchange Act Sections 15F(h) and 15F(k).
---------------------------------------------------------------------------

    Another commenter, however, contended that, while the proposed
process to require an application and certification would establish a
registration process that is simple and efficient, the approach taken
would be ineffective and would rely too much on the industry and on
each entity seeking registration.\37\ This commenter suggested that the
Commission independently review SBS Entities prior to granting
registration.\38\ This commenter argued that requiring SEC pre-
registration investigations would harmonize the registration process
for SBS Entities with others (including SRO review of broker-dealers
and NFA review of swap entities), reduce regulatory arbitrage, and
protect investors. This commenter also suggested, in the alternative,
that we should require each SBS Entity to have an independent auditor
conduct a pre-registration review.\39\
---------------------------------------------------------------------------

    \37\ See 2011 Better Markets Letter, at 2.
    \38\ Id., at 3-4.
    \39\ Id., at 5. The commenter did not specify what a pre-
registration review by an independent auditor should entail.
---------------------------------------------------------------------------

    The Commission is not, at this time, adopting the commenter's
suggestion that the Commission conduct a pre-registration examination
of each applicant, or that we require an applicant to obtain a pre-
registration review from an independent auditor.\40\ The Commission
does not presently conduct pre-registration reviews for other types of
market intermediary applicants, such as investment advisers, municipal
advisors and transfer agents, or require that they obtain a pre-
registration examination from an independent auditor. We recognize that
SROs perform pre-registration reviews for broker-dealers, however, the
Exchange Act does not create an SRO structure for SBS Entities.\41\ The
Commission believes that the Senior Officer Certification that
applicants must submit should help ensure that each applicant itself
has thoroughly reviewed what it must do to comply with applicable
federal securities laws and the rules thereunder. In addition, the CCO
Certification Regarding Associated Persons is designed to provide the
Commission with representations that each applicant has determined that
none of its associated persons who effect or are involved in effecting
security-based swaps on its behalf is subject to a statutory
disqualification, unless otherwise specifically provided by Commission
rule, regulation or order.\42\ Additionally, the Commission will review
all of the documents and other information provided by the applicants
on the required Form. The Commission also may, based on an initial
assessment of an application, request follow-up information from the
applicant.\43\ The Commission believes that its review of the
information provided in the application, coupled with the Senior
Officer Certification as discussed above, is a reasonable approach to
registration.
---------------------------------------------------------------------------

    \40\ As with any new class of registrants, Commission staff will
incorporate oversight of those registrants into its examination
program to review for compliance with the federal securities laws,
rules and regulations.
    \41\ See infra, footnote 46 and accompanying text.
    \42\ See infra, Section II.B.3.
    \43\ In the case of an entity registered with the CFTC through
NFA, the staff may contact the CFTC or NFA to discuss the
application.
---------------------------------------------------------------------------

    As noted above, commenters asked that we clarify what we mean by
``due inquiry'' in the certification requirement.\44\ Essentially, the
senior officer should perform diligence regarding the content of what
he or she is required to certify. We believe, however, that SBS
Entities should have flexibility to determine the steps that the senior
officer who must sign the certification will take to be comfortable
that he or she has made appropriate inquiries regarding the SBS
Entity's written policies and procedures in order to make the
certification. For instance, a senior officer might review the SBS
Entity's written policies and procedures and/or speak with the SBS
Entity's legal and compliance personnel regarding the SBS Entity's
written policies and procedures, how they were developed, and how they
have been implemented by the SBS Entity. Alternatively, there may be
one or more senior officers that are already familiar with the SBS
Entity's written policies and procedures and how they have been
developed and implemented. It would not be appropriate for a senior
officer with little or no knowledge of the firm's written policies and
procedures, or its processes to comply with applicable regulations, to
sign this certification without taking any steps to learn more
information. In light of this, we also have eliminated the requirement
that the senior officer signing the form be ``knowledgeable'' because
inclusion of the requirement that the senior officer be
``knowledgeable'' in addition to requiring that the senior office make
``due inquiry'' would be unnecessary.
---------------------------------------------------------------------------

    \44\ See SIFMA Letter at 6.
---------------------------------------------------------------------------

    One commenter also contended that this requirement differed from
the CFTC's registration requirements for swap entities, and that the
lack of a similar certification requirement in the CFTC's proposed
registration rule ``provides further evidence that such a requirement
is not needed to promote financial stability or investor protection.''
\45\ While this certification requirement differs from rules adopted by
the CFTC to register swap dealers and major swap participants, the
Commodity Exchange Act (``CEA'') and the Exchange Act differ in some
respects. While the provisions in the CEA directly relating to swap
dealers and major swap participants are similar to those in the
Exchange Act relating to SBS Entities, other CEA provisions provide the
CFTC with the ability to require swap dealers and major swap
participants to become members of NFA, and thus leverage the existing
registration process and forms (including a pre-registration review by
NFA) used by other CFTC registrants.\46\ However, Exchange Act Sections
15A(a) and 3(a)(3)(B) limit the membership of national securities
associations to brokers and dealers. In light of the fact that SBS
Entities are not subject to SRO oversight, and thus are not subject to
the registration review process of an SRO, the adopted Senior Officer
Certification is designed to cause SBS Entities to consider whether
they have taken steps

to thoroughly review the federal securities laws and the rules
thereunder that are applicable to SBS Entities and develop and
implement written policies and procedures that are reasonably designed
to prevent violation of the those laws, rules and regulations.
---------------------------------------------------------------------------

    \45\ See id.
    \46\ CEA Section 17(b)(2) permits any CFTC registrant to become
a member of a registered futures association (i.e., NFA) and CEA
Section 8a(5) gives the CFTC rulemaking authority ``to effectuate
any of the provisions or to accomplish any of the purposes of this
Act.'' In addition, CEA Section 4s(b)(4) gives the CFTC general
authority to prescribe rules applicable to swap dealers and major
swap participants.
---------------------------------------------------------------------------

iii. Conditional Registration
    The Commission proposed in Rule 15Fb2-1 a conditional registration
requirement that would have required an SBS Entity to apply for
conditional registration by submitting a complete Form SBSE, Form SBSE-
A, or Form SBSE-BD to the Commission, then file a Senior Officer
Certification (on Form SBSE-C) \47\ before the Last Compliance Date
\48\ to facilitate the Commission's review of each firm's application
for ongoing, permanent registration. The Commission proposed
conditional registration as a way to register SBS Entities within the
Dodd-Frank Act deadline, while allowing SBS Entities to come into
compliance with new rules on each respective compliance date and then
providing the certification after the last compliance date.\49\
---------------------------------------------------------------------------

    \47\ Form SBSE-C was designed to provide a standard format by
which SBS Entities could file their Senior Officer Certifications
(discussed in Section II.1.ii., supra).
    \48\ The term ``Last Compliance Date'' was defined, in paragraph
(e) to proposed Rule 15Fb2-1, to mean the latest date, designated by
the Commission, by which SBS Entities must comply with any of the
initial, substantive rules promulgated under Section 15F.
    \49\ See also infra Sections II.A.1.v., which discusses the
proposed standard for granting conditional registration in proposed
Rule 15Fb2-1(e)(1), and II.C.1., which discusses the proposed timing
of conditional registration in proposed Rule 15Fb3-1.
---------------------------------------------------------------------------

    The Commission is adopting a conditional registration process, but
with changes to take into account the adopted definitions of SBS Dealer
and Major SBS Participant, the timing of the compliance date for
registration (see Section III below), and the modification to the
certification.
    Pursuant to Rules 3a71-2 and 3a67-8, upon filing of a complete
application, a person is deemed to be an SBS Dealer or a Major SBS
Participant, respectively.\50\ However, Exchange Act Section 15F(a)
makes it unlawful for a person to act as an SBS Entity unless the
person is registered as such with the Commission. Consequently, we
believe it is necessary and appropriate to provide conditional
registration for SBS Entities upon the filing of a complete application
on Form SBSE, SBSE-A, or SBSE-BD, as applicable, and Form SBSE-C so
that existing entities are not required to cease operations during the
Commission's consideration of their application. Thus, we are adopting
a conditional registration process to permit applicants to continue
engaging in security-based swap activities after they file an
application to register as an SBS Entity but before the Commission acts
on their application for ongoing registration.
---------------------------------------------------------------------------

    \50\ Pursuant to Exchange Act Rule 3a71-2(b), a person will be
deemed not to be a security-based swap dealer until the earlier of
the date on which it submits a complete application for registration
or two months after the end of the month in which that person
becomes no longer able to take advantage of the de minimis
exception. Rule 3a71-2(b). Similarly, a person that meets the
criteria in Rule 3a67-1(a) to be a major security-based swap
participant will be deemed not to be a major security-based swap
participant until the earlier of the date on which it submits a
complete application for registration or two months after the
quarter in which it met those criteria. See Rule 3a67-8. See also,
Intermediary Definitions Adopting Release which, among other things,
further defines the terms ``security-based swap dealer'' and ``major
security-based swap participant.'' In that release, adopted jointly
with the CFTC, the Commission adopted Rule 3a71-2, which provides a
de minimis exemption from the definition of ``security-based swap
dealer,'' and provided timeframes within which an entity must
register with the Commission after it exceeds the de minimis
threshold [at 77 FR 30643, 30754 and 30756]. The Commission also
adopted Rule 3a67-8, which establishes the timing requirements
within which a person must register with the Commission if it meets
the criteria in Rule 3a67-1 to be a major security-based swap
participant.
---------------------------------------------------------------------------

    Under the rule as adopted, an applicant must submit the Senior
Officer Certification on Form SBSE-C at the same time it submits its
Form SBSE, SBSE-A or SBSE-BD, as applicable. Given that the compliance
date for the SBS Entity registration rules is not immediate and we have
amended Form SBSE-C to include a modified Senior Officer Certification
along with the CCO Certification Regarding Associated Persons, the
certifications will be a necessary part of the Commission's
determination of whether to grant, or institute proceedings to deny,
ongoing registration. Consequently, applicants must file the
certifications on Form SBSE-C as part of their applications at the same
time they file Form SBSE, SBSE-A, or SBSE-BD, as applicable. Thus,
paragraph (d) of new Rule 15Fb2-1 states that a person that has filed a
complete Form SBSE-C and Form SBSE, SBSE-A, or SBSE-BD, as applicable,
with the Commission in accordance with paragraph (c) within the time
periods set forth in Exchange Act rules 3a67-8 and 3a71-2, as
applicable, and has not withdrawn from registration,\51\ will be
conditionally registered.\52\
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    \51\ A conditionally registered SBS Entity would withdraw from
registration by filing Form SBSE-W as described in more detail below
in Section II.C.2.
    \52\ Once an SBS Entity is conditionally registered, all of the
Commission's rules applicable to registered SBS Entities will apply
to the entity and it must comply with them. For instance, a
conditionally registered SBS Entity will be required to comply with
any recordkeeping rules applicable to SBS Entities. In addition, the
staff may choose to conduct an examination of a conditionally
registered firm.
---------------------------------------------------------------------------

    An applicant will be considered to be conditionally registered upon
filing a complete application, but will not have ongoing registration
until the Commission takes action to grant such registration. In that
regard, final Rule 15Fb3-1(b), discussed more fully below, provides
that a person conditionally registered as an SBS Entity will continue
to be so registered until the date the registrant withdraws from
registration or the Commission grants or denies the person's ongoing
registration in accordance with Rule 15Fb2-1(e).
iv. Electronic Filing and Completeness of the Application
    Paragraph (c)(1) of proposed Rule 15Fb2-1 would have established
that the application, certification, and any additional registration
documents would need to be filed electronically with the Commission or
its designee. In addition, paragraph (c)(2) of proposed Rule 15Fb2-1
would have provided that an SBS Entity's application submitted pursuant
to paragraph (c)(1) will be considered filed only when a complete Form
SBSE, Form SBSE-A, or Form SBSE-BD, as appropriate, and all required
additional documents are filed with the Commission or its designee. In
addition, the Commission proposed temporary Rule 15Fb2-2T to require
SBS Entities to, among other things, file their applications on Form
SBSE, Form SBSE-A, or Form SBSE-BD, as applicable, and all additional
documents in paper form by sending them in hard-copy to the Commission,
notwithstanding paragraph (c)(1) of Rule 15Fb2-1, if the development of
an electronic system to receive those Forms was not yet functional by
the time final rules were adopted.
    The Commission stated in the Registration Proposing Release that it
``[anticipated] that the EDGAR system will be expanded to facilitate
registration of SBS Entities because it likely would provide the most
cost-effective solution.'' \53\ In addition, the instructions to
proposed Forms SBSE, SBSE-A, and SBSE-BD all indicated that ``[t]he
applicant must file [the Form] through the EDGAR system, and must
utilize the EDGAR Filer Manual (as defined in 17 CFR 232. 11) to file
and amend [the Form] electronically to

assure the timely acceptance and processing of those filings.''
---------------------------------------------------------------------------

    \53\ See the Registration Proposing Release, at 65793.
---------------------------------------------------------------------------

    One commenter stated that its members believe that the use of the
EDGAR system to facilitate registration may raise technological issues
for entities whose computer systems cannot access the EDGAR system
because of incompatible security protocols or technology.\54\ This
commenter suggested that the Commission should provide at least six
months between the adoption of final rules and the effective date of
the registration requirement to allow for resolution of these types of
issues.
---------------------------------------------------------------------------

    \54\ See SIFMA Letter, at 3.
---------------------------------------------------------------------------

    The Commission is adopting proposed paragraph (c)(1) regarding the
electronic filing requirement substantially as proposed. Thus,
paragraph (c)(1) of Rule 15Fb2-1 will require applications and any
additional documents to be filed electronically with the Commission
through the Commission's EDGAR system.\55\ Given the timing of the
compliance date for these rules (see Section III below), we believe
firms will have sufficient time to work out any technological issues
associated with filing registration forms through the Commission's
EDGAR system. The Commission is not adopting Rule 15Fb2-2T because the
EDGAR system will be updated to receive these application Forms before
the compliance date of these rules.
---------------------------------------------------------------------------

    \55\ As discussed in the Registration Proposing Release, because
the registration forms will be required to be submitted through
EDGAR, the electronic filing requirements of Regulation S-T will
apply. See 17 CFR 232 (governing the electronic submission of
documents filed with the Commission). General information about
EDGAR is available at http://www.sec.gov/info/edgar.shtml, where the
EDGAR Filer Manual can also be accessed. The EDGAR Filer Manual
contains all the technical specifications for filers to submit
filings using the EDGAR system. The Commission recommends that
applicants read this filer manual before they begin using the
system. Generally, entities filing documents in electronic format
through the EDGAR system must comply with the applicable provisions
of the EDGAR Filer Manual in order to assure the timely acceptance
and processing of those filings.
---------------------------------------------------------------------------

    In the Registration Proposing Release, the Commission also
discussed the possibility of requiring firms to ``tag'' data submitted
using a computer markup language that can be processed by software
programs for analysis (such as eXtensible Markup Language (XML) and
eXtensible Business Reporting Language (XBRL)).\56\ At that time we
indicated that collecting the information in a standardized format
would allow us to make the information available to the public in a
format that makes it easier to review and manipulate.\57\ We received
no comments on the possible use of XML or XBRL.
---------------------------------------------------------------------------

    \56\ See Registration Proposing Release, 76 FR at 65806.
    \57\ Id.
---------------------------------------------------------------------------

    The process we will use to collect the Forms, and the data
contained thereon, is consistent with what was proposed. The Forms are
being developed with a graphical user interface that will allow users
to complete a fillable Form on the EDGAR Web site.\58\ As the data will
be collected in a structured format, we believe it is not necessary to
require that SBS Entities submit the information in a ``tagged''
format. Collecting the data in a structured format will allow us to
make the data public in a manner that will enable users of that data to
retrieve, search, and analyze the data through automated means.
---------------------------------------------------------------------------

    \58\ To access the Forms, applicants will need to complete the
Form ID process and obtain a CIK number and passcode from the
Commission.
---------------------------------------------------------------------------

    We are also planning to allow a batch filing process utilizing the
XML tagged data format that firms could use to upload application
information to the EDGAR system. Applicants and SBS Entities will not
be required to utilize this process, but may choose to do so. We
believe that some applicants and/or SBS entities may prefer to register
or amend their Forms using the batch XML format because it would allow
them to automate aspects of the registration process, which may
minimize burdens and generate efficiencies. This may be especially true
for firms that are already using Edgar's Filer Constructed Submissions
capabilities to submit other forms. In connection with the batch filing
process, we anticipate publishing a taxonomy of XML data tags in
advance of the compliance date for SBS Entity registration for use by
filers taking advantage of the optional batch submission process.\59\
---------------------------------------------------------------------------

    \59\ Use of such an XML taxonomy will allow the Commission to
normalize the data received using the batch filing process with the
data collected through the use of the structured Forms and thereby
make the data available to the public in a seamless way.
---------------------------------------------------------------------------

    The Commission received no comments on paragraph (c)(2) of proposed
Rule 15Fb2-1, and is adopting that paragraph, substantially as
proposed.\60\
---------------------------------------------------------------------------

    \60\ We modified the rule text of proposed Rule 15Fb2-1(c)(2) to
eliminate the phrase ``or its designee.'' As applications will be
submitted through the Commission's EDGAR system, they will not be
submitted to any designee.
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v. Standards for Granting or Instituting Proceedings to Determine
Whether to Deny Registration
    Paragraph (d) of proposed Rule 15Fb2-1 would have provided that the
Commission may grant or deny applications for conditional and ongoing
registration, and set forth the standards the Commission would use to
make that determination. In particular, paragraph (d)(1) of the
proposed rule specified that the Commission would grant conditional
registration if it found the applicant's application was complete, and
paragraph (d)(2) specified that the Commission would grant ongoing
registration if it finds that the requirements of Exchange Act Section
15F(b) are satisfied. Proposed paragraph (d)(1) also indicated that the
Commission may institute proceedings to determine whether conditional
registration should be denied if it found that that the applicant is
subject to a statutory disqualification (as defined in 15 U.S.C.
78c(a)(39)) or if the Commission was aware of inaccurate statements in
the application. In addition, proposed paragraph (d)(2) indicated that
the Commission may institute proceedings to determine whether ongoing
registration should be denied if it found that the requirements of
Exchange Act Section 15F(b) had not been satisfied, the applicant is
subject to a statutory disqualification (as defined in Exchange Act
Section 78c(a)(39)), or if the Commission is aware of inaccurate
statements in the application or certification. Paragraph (d)(2) also
stated that the Commission may grant or deny ongoing registration based
on an SBS Entity's application and certification, and that a
conditionally registered SBS Entity need not submit a new application
to apply for ongoing registration, but must amend its application, as
required pursuant to Sec.  240.15Fb2-3. The Commission received no
comments on proposed paragraph (d).
    As discussed above, we have made conditional registration automatic
upon submission of a complete application, which includes Form SBSE-C
and Form SBSE, SBSE-A or SBSE-BD, as applicable. Paragraph (d) of Rule
15Fb2-1 as adopted states that an applicant that has submitted a
complete Form SBSE-C and a complete Form SBSE, SBSE-A, or SBSE-BD, as
applicable, in accordance with Rule 15Fb2-1(c) within the time periods
set forth in Rule 3a67-8 (if the person is a Major SBS Participant) or
Rule 3a71-2(b) (if the person is an SBS Dealer), and has not withdrawn
its registration shall be conditionally registered.\61\ Therefore, we
are not adopting the proposed standards for granting conditional
registration or instituting proceedings to

determine whether to deny conditional registration.
---------------------------------------------------------------------------

    \61\ See supra, Section II.A.1.iii.
---------------------------------------------------------------------------

    The Commission is adopting the standards for making a determination
to grant or deny ongoing registration proposed in paragraph (d)(2) with
two modifications, and renumbering it as paragraph (e) to Rule 15Fb2-1.
First, we amended the reference to Exchange Act Section 3(a)(39). As
described in Section II.B. below in the discussion about proposed Rule
15Fb6-1, Exchange Act Section 15F(b)(6) uses the term ``statutory
disqualification,'' but the definition of statutory disqualification in
the Exchange Act specifically relates to a person's association with an
SRO.\62\ To address this inconsistency, we amended the rule text to
replace the phrase ``as defined in Section 3(a)(39) of the Securities
Exchange Act of 1934'' with the phrase ``as described in Sections
3(a)(39)(A)-(F) of the Securities Exchange Act of 1934.'' This updated
cross-reference incorporates the underlying issues that give rise to
statutory disqualification without reference to SRO membership.\63\ In
addition, we added the phrase ``or cannot'' to clarify that we may
institute proceedings to deny where we are unable to make a finding due
to, for example, a lack of necessary information.
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    \62\ See infra footnote 78 and accompanying text.
    \63\ We intend for this description to parallel Exchange Act
Section 3(a)(39). If Congress were to amend the definition of
statutory disqualification in Exchange Act Section 3(a)(39), we
believe it would be appropriate for the Commission to consider
amending Rule 15Fb6-2 to assure that this description remains
consistent with the statutory definition.
---------------------------------------------------------------------------

    Rule 15Fb2-1(e) as adopted states that the Commission may deny or
grant ongoing registration to an SBS Dealer or Major SBS Participant
based on an SBS Dealer's or Major SBS Participant's application, filed
pursuant to paragraph (a) of this section. In addition, Rule 15Fb2-1(e)
as adopted provides that the Commission will grant ongoing registration
if it finds that the requirements of Exchange Act Section 15F(b) are
satisfied. Further, Rule 15Fb2-1(e) provides that the Commission may
institute proceedings to determine whether ongoing registration should
be denied if it does not or cannot make such finding, if the applicant
is subject to a statutory disqualification (described in Sections
3(a)(39)(A) through (F) of the Exchange Act), or the Commission is
aware of inaccurate statements in the application, and that such
proceedings shall include notice of the grounds for denial under
consideration and opportunity for hearing. Finally, the rule states
that at the conclusion of such proceedings, the Commission shall grant
or deny such registration. The Commission intends to notify entities
electronically through the EDGAR system when registration is granted,
and will make information regarding registration status publicly
available on EDGAR.
    As indicated above, final Rule 15Fb2-1(e) also states that such
proceedings will include notice of the grounds for denial under
consideration and opportunity for hearing, and that at the conclusion
of the proceedings, the Commission shall grant or deny such
registration. An applicant would have the opportunity (once proceedings
are commenced) to provide information as to why the Commission should
grant registration.
    In addition, as ongoing registration is no longer contingent on an
applicant filing a Form SBSE-C after the ``Last Compliance Date,'' but
rather the certification must be filed as part of the initial
submission of the application, we removed the language in proposed Rule
15Fb2-1(d)(2) stating that a conditionally registered SBS Entity need
not submit a new application to apply for ongoing registration. We also
revised the cross-references given the fact that the requirement to
file a certification on Form SBSE-C is now included in paragraph (a)
rather than paragraph (b).
vi. Comments on Substituted Compliance
    In the Cross Border Proposing Release, the Commission proposed Rule
3a71-5 to facilitate certain substituted compliance determinations by
the Commission for foreign SBS Dealers.\64\ Paragraph (a)(3) of that
proposed rule specified that the Commission would not make a
substituted compliance determination with respect to registration
requirements described in Sections 15F(a)-(d) of the Exchange Act and
the rules and regulations thereunder.
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    \64\ See Cross-Border Proposing Release, at 31207-8.
---------------------------------------------------------------------------

    One commenter urged the Commission to consider conditions upon
which it could allow appropriate foreign market participants to satisfy
the registration requirements through compliance with the relevant
requirements in their home jurisdictions, with appropriate notice of
such compliance to the SEC.\65\ This commenter urged the Commission not
to delay its implementation of its proposed rules to address this issue
but to keep consideration ``open in order to achieve the full benefits
of substituted compliance over the full range of regulatory issues in
due course.'' \66\
---------------------------------------------------------------------------

    \65\ See IIF Letter, at 3-4.
    \66\ See id. at 4.
---------------------------------------------------------------------------

    After further considering the purposes of our proposed approach to
substituted compliance, the Commission continues to believe that
substituted compliance should not be available for SBS Entity
Registration. Requiring foreign persons that engage in security-based
swap dealing activity at levels above the SBS Dealer de minimis
threshold to register serves an important regulatory function that
would be significantly impaired by permitting substituted compliance.
    Specifically, the Commission has inspection and examination
authority over registered SBS Entities, including access to relevant
books and records.\67\ As we have noted, ``this approach to territorial
application of Title VII provides a reasonable means of helping to
ensure that our regulatory framework focuses on security-based swap
activity that is most likely to raise the concerns that Congress
intended to address in Title VII.'' \68\ The Commission's inspection
and examination authority is part of proper oversight of such dealers,
and any limitation on oversight of foreign registered SBS Dealers would
impair the Commission's effective regulation of these firms and their
security-based swap transactions because it would deprive the
Commission of a full picture of their business.\69\ Permitting a
foreign SBS Dealer to satisfy these requirements through compliance
with the relevant requirements in its home jurisdiction, even with
appropriate notice of such compliance to the Commission, may deprive
the Commission of the necessary information, including information
resulting from inspection

and examination of the books and records of a firm engaged in dealing
activity at levels above the de minimis threshold.
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    \67\ See Exchange Act Section 15F(f)(1)(C) (requiring registered
security-based swap dealers and registered major security-based swap
participants to keep books and records ``open to inspection and
examination by any representative of the Commission'').
    \68\ See Cross-Border Adopting Release, at 47288.
    \69\ See Cross-Border Proposing Release, at 31015. See also,
Application of Certain Title VII Requirements to Security-Based Swap
Transactions Connected With a Non-U.S. Person's Dealing Activity
That Are Arranged, Negotiated, or Executed by Personnel Located in a
U.S. Branch or Office or in a U.S. Branch or Office of an Agent,
Exchange Act Release No. 74834 (Apr. 29, 2015), 80 FR 27444 (May 13,
2015) (the ``Cross-Border Activity Proposing Release''), at footnote
163 and accompanying text (noting that the Commission must have
access to books and records of firms that engage in dealing activity
in the United States to effectively monitor the market for abusive
and manipulative conduct). For this reason, the Commission is also
adopting a rule that would require nonresident security-based swap
dealers to certify that they can, as a matter of law, and will
provide the Commission with access to their books and records and
submit to onsite examination. See infra, Section II.D.3.
---------------------------------------------------------------------------

    As we have previously noted, access to books and records is
necessary to ensure that the Commission is able to monitor the market
for abusive and manipulative practices connected with security-based
swap activity in the United States.\70\ Accordingly, we are not
providing for substituted compliance in the context of the registration
requirement.\71\ The Commission intends to consider the potential
availability of substituted compliance in connection with other
requirements applicable to SBS Dealers, when the Commission considers
final rules to implement those requirements.
---------------------------------------------------------------------------

    \70\ See Cross-Border Activity Proposing Release, at 27466. We
have also noted that Title VII recordkeeping requirements will
likely be the Commission's primary tool in monitoring compliance
with applicable securities laws, including the antifraud provisions
of these laws. See id. See also Requirements for Security-Based Swap
Dealers, Major Security-Based Swap Participants, and Broker-Dealers;
Capital Rule for Certain SBSDs; Proposed Rules, Exchange Act Release
No. 71958 (April 17, 2014), 79 FR 25194, 25199 (May 2, 2014) (citing
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), Exchange Act
Release No. 44238 (May 1, 2001), 66 FR 22916 (May 7, 2001); Books
and Records Requirements for Brokers and Dealers Under the
Securities Exchange Act of 1934, Exchange Act Release No. 44992
(October 26, 2001), 66 FR 55818 (November 2, 2001)).
    \71\ Given the importance of ensuring that we have the ability
to inspect and examine every security-based swap dealer whose
relevant dealing activity exceeds the security-based swap dealer de
minimis threshold, we think it appropriate to address whether
substituted compliance should be allowed with respect to our
registration rules in the context of this rulemaking, rather than
keep open consideration of substituted compliance for the
registration rules, as suggested by the commenter. However, the
Commission is not addressing in this rulemaking the potential
availability of substituted compliance for SBS Dealers with respect
other Commission rules to which SBS Dealers would be subject as a
registered SBS Dealer. Instead, we intend to address substituted
compliance issues for other rulemakings in the releases finalizing
those rules.
---------------------------------------------------------------------------

2. Amendments to Form SBSE, Form SBSE-A, and Form SBSE-BD: Rule 15Fb2-3
    As proposed, Rule 15Fb2-3 would have required an SBS Entity to
promptly file an amendment electronically with the Commission, or its
designee to amend its application to correct any information it
determines was, or had become, inaccurate for any reason. The
Commission indicated in the release that the proposed rule was based on
Exchange Act Rule 15b3-1, applicable to registered broker-dealers,
which has worked well to assure that broker-dealers promptly amend
their applications.\72\ In addition, the Commission indicated that, for
purposes of proposed Rule 15Fb2-3, it believed that it would be
appropriate to interpret the term ``promptly'' to mean within 30
days.\73\
---------------------------------------------------------------------------

    \72\ See Registration Proposing Release, footnote 54.
    \73\ See Registration Proposing Release, footnote 53.
---------------------------------------------------------------------------

    The Commission received no comments regarding this proposed rule,
and is adopting it substantially as proposed. However, we modified the
rule to make two changes. As the application for registration now
includes the certifications on Form SBSE-C,\74\ we revised the rule to
specify that if an SBS Entity finds that the information contained in
its Form SBSE, Form SBSE-A, or Form SBSE-BD, as appropriate, or in any
amendment thereto, is or has become inaccurate for any reason, the SBS
Entity shall promptly file an amendment to the appropriate Form to
correct such information. This change clarifies that the certifications
on Form SBSE-C are one-time certifications and Form SBSE-C need not be
amended.\75\ We also made a technical change to specify that amendments
must be made through the Commission's EDGAR system, and to remove the
phrase ``its designee'' because amendments will be filed through the
EDGAR system directly with the Commission.\76\ The Commission believes
this rule is necessary in order for it to have prompt access to
accurate information as part of its ongoing oversight of SBS Entities.
---------------------------------------------------------------------------

    \74\ See supra, Section II.A.1.i., and Rule 15Fb2-1(a).
    \75\ For more information on the Senior Officer Certification,
see supra, Section II.A.1.ii. For more information on the CCO
Certification Regarding Associated Persons, see infra, Section II.B.
For more information on Form SBSE-C, see infra, Section II.G.4. See
also footnote 30; Exchange Act Sections 15F(b)(6), 15F(h), and
15F(k); and rules proposed in the Business Conduct Standards
Proposing Release.
    \76\ See supra, Section II.A.1.iv.
---------------------------------------------------------------------------

B. Associated Persons

    Paragraph (b)(6) of Exchange Act Section 15F generally prohibits an
SBS Dealer or Major SBS Participant, except as otherwise permitted by
rule, regulation or order of the Commission, from permitting any person
associated with the SBS Dealer or Major SBS Participant who is subject
to a ``statutory disqualification'' to effect or be involved in
effecting security-based swaps on behalf of the SBS Entity if the SBS
Entity knew, or in the exercise of reasonable care should have known,
of the statutory disqualification.\77\
---------------------------------------------------------------------------

    \77\ On June 15, 2011, the Commission issued an Order that,
among other things, granted temporary relief from compliance with
Exchange Act Section 15F(b)(6), and Exchange Act Section 29(b), 15
U.S.C. 78cc(b), concerning enforceability of contracts that would
violate, among other provisions, Exchange Act Section 15F(b)(6). See
the Effective Date Release. That Order expires on the effective date
of rules adopted by the Commission to register SBS Entities. The
Commission will consider separately extending the expiration date of
the temporary relief.
---------------------------------------------------------------------------

    Although Exchange Act Section 15F(b)(6) does not define ``subject
to a statutory disqualification,'' the term has an established meaning
under Section 3(a)(39) of the Exchange Act, which defines circumstances
that would subject a person to a statutory disqualification with
respect to membership or participation in, or association with a member
of, an SRO. In the Registration Proposing Release, proposed rule 15Fb6-
1 referenced the definition of ``statutory disqualification'' set forth
in Section 3(a)(39), and the Commission proposed to make this
definition applicable to Exchange Act Section 15F(b)(6),
notwithstanding the absence of an SRO for SBS Entities.\78\
Accordingly, as proposed, a person would have been ``subject to a
statutory disqualification'' for purposes of proposed Rule 15Fb6-1 if
that person would be subject to disqualification from association with
a member of an SRO under the provisions of Section 3(a)(39) of the
Exchange Act.\79\
---------------------------------------------------------------------------

    \78\ See Registration Proposing Release 76 FR at 65795 (stating
that Exchange Act Section 15F(b)(6) applies to ``associated persons
who are subject to a `statutory disqualification' (as defined in
Exchange Act Section 3(a)(39))'').
    \79\ Likewise, in a similar context, the Commission has proposed
to adopt the definition of ``statutory disqualification,'' as set
forth in Section 3(a)(39), for SBS Entities. See Business Conduct
Standards Proposing Release, at 42404 n.42429-30, and 42454
(proposed Rule 15Fh-2(f)).
---------------------------------------------------------------------------

    Paragraph (a) of proposed Rule 15Fb6-1 would have prohibited an SBS
Entity from acting as an SBS Dealer or Major SBS Participant unless it
had certified electronically on Schedule G of its application Form that
no person associated with it who effects or is involved in effecting
security-based swaps on its behalf is subject to statutory
disqualification as defined in paragraph (3)(a)(39) of the Exchange
Act.\80\ Paragraph (b) of proposed Rule 15Fb6-1 would have required an
SBS Entity, to support the certification required in paragraph (a), to
obtain a questionnaire or application for employment executed by each
of its

associated persons who effects or is involved in effecting security-
based swaps on behalf of the SBS Entity that contains certain,
specified information, which would serve as a basis for a background
check of the associated person.\81\ The proposal also would have
required that the questionnaire or application be reviewed and signed
by the SBS Entity's CCO. Paragraph (c) of proposed Rule 15Fb6-1 would
have required that an SBS Entity maintain all questionnaires and
applications for employment obtained pursuant to proposed paragraph (b)
as part of its books and records for at least three years after the
associated person has terminated his or her association with the SBS
Entity.
---------------------------------------------------------------------------

    \80\ As proposed, if an associated person later became
statutorily disqualified, the SBS Entity would have been required to
ensure that the associated person did not continue to effect or be
involved in effecting security-based swaps on the SBS Entity's
behalf and/or promptly amend its Schedule G in accordance with
proposed Rule 15Fb2-3. See Registration Proposing Release, at 65795-
96.
    \81\ As proposed, Schedule G would have required that the
applicant certify that it had ``performed background checks on all
of its associated persons who effect or are involved in effecting,
or who will effect or be involved in effecting, security-based swaps
on its behalf, and determined that no associated person who effects
or is involved in effecting, or who will effect or be involved in
effecting, security-based swaps on its behalf is subject to
statutory disqualification, as defined in Section 3(a)(39) of the
Securities Exchange Act of 1924.'' See Proposed Schedule G,
Registration Proposing Release, at 65841, 65863 and 65878. The
Commission asked questions regarding the Forms, including Schedule G
(76 FR at 65802 to 65805), but received no comments on Schedule G.
---------------------------------------------------------------------------

    The Commission stated in the Registration Proposing Release that it
believed the term ``involved in effecting'' security based swaps would
encompass associated persons engaged in functions necessary to
facilitate the SBS Entity's security-based swap business, including,
but not limited to, associated persons involved in drafting and
negotiating master agreements and confirmations, persons recommending
security-based swap transactions to counterparties, persons on a
trading desk actively involved in effecting security-based swap
transactions, persons pricing security-based swap positions and
managing collateral for the SBS Entity, and persons assuring that the
SBS Entity's security-based swap business operates in compliance with
applicable regulations.\82\ In short, the term would encompass persons
engaged in functions necessary to facilitate the SBS Entity's security-
based swap business.
---------------------------------------------------------------------------

    \82\ Registration Proposing Release, at 65795, footnote 56.
---------------------------------------------------------------------------

    The Commission received one comment regarding the scope of the
proposed certification and information requirements in proposed
paragraphs (a) and (b) of Rule 15Fb6-1.\83\ The commenter stated its
belief that, based on the Commission's definition of the phrase
``involved in effecting,'' SBS Entities could have hundreds, if not
thousands, of associated natural persons who effect or are involved in
effecting security-based swaps.\84\ Moreover, the commenter stated that
the definition of ``associated person'' could be read to extend not
just to natural persons, but also to entities that are affiliates of
SBS Entities.\85\ As a result, the commenter stated its view that
prohibiting statutorily disqualified entities from effecting or being
involved in effecting security-based swaps could result in
``considerable'' business disruptions and other ramifications.\86\ To
address these concerns, the commenter suggested that the Commission
could (1) limit the scope of associated persons of SBS Entities solely
to natural persons, or (2) narrow the types of activities that would
cause an associated person to be deemed to be ``involved in effecting
security-based swaps.'' \87\
---------------------------------------------------------------------------

    \83\ See SIFMA Letter, at 7-9.
    \84\ Id.
    \85\ Id.
    \86\ Id. The commenter did not provide supporting data regarding
the number of associated persons or the magnitude of any potential
business disruptions.
    \87\ Id.
---------------------------------------------------------------------------

1. Associated Person Certification
i. Associated Person Entities
    Exchange Act Section 3(a)(70) generally defines the term ``persons
associated with'' an SBS Entity to include (i) any partner, officer,
director, or branch manager of an SBS Entity (or any person occupying a
similar status or performing similar functions); (ii) any person
directly or indirectly controlling, controlled by, or under common
control with an SBS Entity; or (iii) any employee of an SBS Entity.\88\
The definition of ``person'' under Exchange Act Section 3(a)(9) is not
limited to natural persons, but extends to both entities and natural
persons.\89\ Thus, the statutory prohibition in Exchange Act Section
15F(b)(6), with respect to associated persons of an SBS Entity subject
to a statutory disqualification, extends to both natural persons and
entities.
---------------------------------------------------------------------------

    \88\ See 15 U.S.C. 78c(a)(70). The definition generally excludes
persons whose functions are solely clerical or ministerial. See also
Registration Proposing Release, footnote 55, and Cross-Border
Activity Proposing Release, footnote 193.
    \89\ 15 U.S.C. 78c(a)(9) (``The term `person' means a natural
person, company, government, or political subdivision, agent, or
instrumentality of a government.'').
---------------------------------------------------------------------------

    In the Registration Proposing Release, the Commission asked whether
it was possible that an associated person that is an entity that
effects or is involved in effecting security-based swaps on behalf of
an SBS Entity would be subject to a statutory disqualification and, if
so, if we should consider excepting those persons from the prohibition
in Section 15F(b)(6).\90\ We also asked whether we should except such
persons globally or on an individual basis, and whether there should be
any differentiation in relief based upon whether the person was a
natural person or an entity.\91\ As indicated above, one commenter
noted that ``business disruptions and other ramifications stemming from
an entire entity being statutorily disqualified from effecting or being
involved in effecting security-based swaps could be considerable.''
\92\ This commenter suggested a number of ways the Commission could
address this issue, including a suggestion that the Commission limit
the scope of associated persons of SBS Entities solely to natural
persons. We note that the CFTC rules provide that associated persons of
swap dealers and major swap participants are natural persons.\93\
---------------------------------------------------------------------------

    \90\ See Registration Proposing Release, question 90.
    \91\ See Registration Proposing Release, questions 91 and 93.
    \92\ See SIFMA Letter, at 8.
    \93\ The CFTC amended CEA Regulation 1.3(aa), which generally
defines the term ``associated person'' for purposes of entities
registered with it, to cover swap dealers and major swap
participants. Consequently, with respect to swap dealers and
security-based swap dealers, the definition reads, ``(aa) Associated
Person. This term means any natural person who is associated in any
of the following capacities with: [. . .] (6) A swap dealer or major
swap participant as a partner, officer, employee, agent (or any
natural person occupying a similar status or performing similar
functions), in any capacity that involves: (i) The solicitation or
acceptance of swaps (other than in a clerical or ministerial
capacity); or (ii) The supervision of any person or persons so
engaged.
     Section 4s(b)(6) of the CEA [7 U.S.C. 6s(b)(6)], which is
equivalent to Section 15F(b)(6) of the Exchange Act, provides that:
``Except to the extent otherwise specifically provided by rule,
regulation, or order, it shall be unlawful for a swap dealer or a
major swap participant to permit any person associated with a swap
dealer or a major swap participant who is subject to a statutory
disqualification to effect or be involved in effecting swaps on
behalf of the swap dealer or major swap participant, if the swap
dealer or major swap participant knew, or in the exercise of
reasonable care should have known, of the statutory
disqualification.''
---------------------------------------------------------------------------

    After taking into consideration the comment and the implementation
of the equivalent CEA provision, the Commission is adopting Rule 15Fb6-
1, which provides that unless otherwise ordered by the Commission, when
it files an application to register with the Commission as an SBS
Dealer or Major SBS Participant, an SBS entity may permit a person
associated with such SBS Entity that is not a natural person and that
is subject to a statutory disqualification, to effect or be involved in
effecting security-based swaps on its behalf, provided that the
statutory

disqualification(s), described in Sections 3(a)(39)(A) through (F) of
the Securities Exchange Act, occurred prior to the compliance date of
this rule, and provided that it identifies each such associated person
on Schedule C of Form SBSE, Form SBSE-A, or Form SBSE-BD, as
appropriate. As discussed below, this rule is designed to facilitate an
orderly registration process by minimizing potential market disruptions
that could occur when firms engaged in the security-based swap business
trigger the requirements to register with the Commission.
    As highlighted above, the scope of the prohibition in Section
15F(b)(6) of the Exchange Act covers a wide range of actions beyond
Commission orders and conduct related to the securities markets,
including actions by SROs, state regulators, criminal authorities and
foreign jurisdictions occurring over a length of time. In addition, the
term associated person is expansive and extends to, among other things,
partners of an SBS Entity and persons directly or indirectly
controlling, controlled by, or under common control with an SBS Entity,
all of which could include a non-natural person.\94\ Moreover, the
conduct that led to the statutory disqualification of an associated
person that is not a natural person may pertain to management practices
that occurred a long time ago and may have been remediated or acts
engaged in by personnel that are no longer employed by the associated
person. Further, as discussed below in Section II.B.1.ii., we generally
view the term ``involved in effecting'' to extend to key aspects of the
overall process of effecting security-based swap transactions,
including sales, booking, and cash and collateral management
activities.
---------------------------------------------------------------------------

    \94\ See supra, footnote 89.
---------------------------------------------------------------------------

    If the prohibition in Section 15F(b)(6) of the Exchange Act were to
be applied without this relief, the Commission is concerned about the
potential for market disruptions. The Commission's concern is
particularly focused on the application of the prohibition under
Section 15F(b)(6) with respect to non-natural associated persons, and
during the transition period when firms engaged in the security-based
swap business, with existing processes and relationships to facilitate
that business, trigger the requirement to register with the Commission.
Specifically, SBS Entities are likely to rely on non-natural associated
persons to provide security-based swap related services to the SBS
Entity, such as advisory, booking, and cash or collateral management
services. SBS Entities engaged in the security-based swap market may
need to either cease operations, even temporarily, due to not being
able to utilize these services of their associated entities, or move
these services to another entity that may not be as well positioned to
handle them, which could have an impact on the security-based swap
market.\95\
---------------------------------------------------------------------------

    \95\ See SIFMA Letter at 8.
---------------------------------------------------------------------------

    With respect to natural persons, we believe that replacing, even
temporarily, a natural person performing a particular security-based
swap function would not create the same practical issues as with moving
the services provided by a non-natural person associated person to
another entity. For example, we believe that moving the cash and
collateral management services from one entity to another would have a
much more significant impact on the ability of the SBS Entity to
operate than assigning a different natural person to negotiate and
execute security-based swap transactions. Further, natural person
associated persons are the persons responsible for actually performing
or overseeing the functions necessary to effect security-based swap
activities. As such, we do not believe this transitional relief in Rule
15Fb6-1 should be extended to cover associated persons that are natural
persons.\96\
---------------------------------------------------------------------------

    \96\ An SBS Entity could seek relief to allow an associated
person subject to statutory disqualification to effect or be
involved in effecting security-based swaps on its behalf. Paragraph
(b)(6) of Exchange Act Section 15F gives the Commission authority to
grant exceptions to the general prohibition ``by rule, regulation,
or order.'' In addition, the Commission has proposed in a separate
rulemaking today to provide a procedure by which SBS Entities could
seek such relief. Applications by Security-Based Swap Dealers or
Major Security-Based Swap Participants for Statutorily Disqualified
Associated Persons to Effect or be Involved in Effecting Security-
Based Swaps, Exchange Act Release No. 75612 (Aug. 5, 2015) (the
``Rule 194 Proposing Release''). See also infra Section III.B.,
which discusses the relationship between the compliance date and
proposed Rule 194.
---------------------------------------------------------------------------

    We therefore are adopting a rule that is designed to facilitate an
orderly registration process by minimizing the potential for market
disruption in a targeted manner. Specifically, Rule 15Fb6-1 is
applicable only to SBS Entity associated persons that are not natural
persons, and the relief provided by the rule will only be available to
firms at the time that they submit applications to register as SBS
Entities. If an SBS Entity is associated with an entity that effects or
is involved in effecting security-based swaps on its behalf that
becomes subject to a statutory disqualification after the compliance
date of these rules but prior to the SBS Entity registering with the
Commission, if an SBS Entity that is registered wants to associate with
an entity that is subject to statutory disqualification that will
effect or be involved in effecting security-based swaps on its behalf,
or if an entity with which an SBS Entity is associated and that effects
or is involved in effecting security-based swaps on its behalf becomes
subject to statutory disqualification after the SBS Entity has
registered, the SBS Entity would need to seek relief from the
Commission.\97\
---------------------------------------------------------------------------

    \97\ Id.
---------------------------------------------------------------------------

    We included the phrase ``unless otherwise ordered by the
Commission'' to make clear that the rule does not preclude the
Commission from exercising its authority under Exchange Act Sections
15F(l) and 21 to take certain actions against associated persons of SBS
Entities, including barring them from association with an SBS Entity,
if it finds the associated person to have engaged in certain enumerated
activities. Likewise, we have also included the phrase ``provided that
the statutory disqualification(s), described in Sections 3(a)(39)(A)
through (F) of the Securities Exchange Act of 1934, occurred prior to
the compliance date of this rule'' to make clear that this rule does
not apply with respect to statutory disqualifications of non-natural
associated persons of the SBS Entity that occur in the future (i.e.,
after the compliance date of the registration rules).
    Finally, the SBS Entity is required to identify, on Schedule C of
Form SBSE, Form SBSE-A, or Form SBSE-BD, as appropriate, those non-
natural persons associated with it, as of the date it submits an
application for registration, that are subject to statutory
disqualification and that it permits to effect or be involved in
effecting security-based swaps on its behalf under the exclusion
provided for in Rule 15Fb6-1. This condition is designed to provide the
Commission with information to assist in its oversight of SBS
Entities,\98\ and to provide market participants with information
regarding the extent to which an SBS Entity relies on this provision.
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    \98\ As discussed in more detail in Section II.G. below, the
Commission will use the information provided in the application for
registration, including Schedule C, as part of its ongoing oversight
of an SBS Entity (for example by assisting representatives of the
Commission in the preparation for examination of an SBS Entity, or
more broadly to monitor risks specific to a firm or to the market
more generally or to assess trends across firms).
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    The Commission believes that the approach in Rule 15Fb6-1
appropriately considers the potentially competing objectives of
facilitating an orderly

registration process by minimizing the potential for market and
counterparty disruption while maintaining strong investor protections.
In particular, while the rule provides targeted relief with respect to
non-natural person entities when an SBS Entity initially registers with
the Commission, it is not applicable to associated persons who are
natural persons and would not apply to entities an SBS Entity may want
to associate with after it is registered nor to statutorily
disqualifying events that occur after the compliance date of the rule.
ii. Involved in Effecting Transactions
    The Commission has previously interpreted the term ``effecting
transactions'' in the context of securities transactions to include a
number of activities, ranging from identifying potential purchasers to
settlement and confirmation of a transaction.\99\ The statutory
provision on statutory disqualification in Section 15F(b)(6) of the
Exchange Act includes the phrase ``involved in effecting,'' separately
and in addition to ``effecting.'' We understand the inclusion of two
separate terms in Section 5F(b)(6) to mean that the terms have
different meanings, and that the term ``involved in effecting''
includes a broader range of activities than simply ``effecting''
security-based swap transactions. Further, while the commenter
suggested that we narrow the scope of the term ``involved in
effecting,'' it did not suggest that we treat ``effect'' and ``involved
in effecting'' as having the same meaning.\100\
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    \99\ See, e.g., Temporary Rule 11a2-2(T), which states, ``a
member [of a national securities exchange] `effects' a securities
transaction when it performs any function in connection with the
processing of that transaction, including, but not limited to, (1)
transmission of a order for execution, (2) execution of the order,
(3) clearance and settlement of the transaction, and (4) arranging
for the performance of any such function.'' 17 CFR 240.11a2-2(T)
(2014), and Definition of Terms in and Specific Exemptions for
Banks, Savings Associations, and Savings Banks Under Sections
3(a)(4) and 3(a)(5) of the Securities Exchange Act of 1934,
Securities Exchange Act Release No. 44291 (May 11, 2001), 66 FR
27760, 27772-73 (May 18, 2001) (where the Commission stated that
``[e]ffecting transactions in securities includes more than just
executing trades or forwarding securities orders to a broker-dealer
for execution. Generally, effecting securities transactions can
include participating in the transactions through the following
activities: (1) Identifying potential purchasers of securities; (2)
screening potential participants in a transaction for
creditworthiness; (3) soliciting securities transactions; (4)
routing or matching orders, or facilitating the execution of a
securities transaction; (5) handling customer funds and securities;
and (6) preparing and sending transaction confirmations (other than
on behalf of a broker-dealer that executes the trades).'' (footnotes
omitted)).
    \100\ See SIFMA Letter, at 8.
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    Generally, we view the types of activities covered by the term
``involved in effecting'' in Section 15F(b)(6) to relate directly to
key aspects of the overall process of effecting security-based swap
transactions, including sales, booking and cash and collateral
management activities. We believe it would be inappropriate to focus
solely on the persons that effect transactions and not also on those
that are involved more broadly in these key aspects of the process
necessary to facilitate transactions, because persons involved in these
key aspects of the process have the ability, through their conduct
(intentional or unintentional), to increase risks to investors,
counterparties and the markets. However, we are further clarifying the
meaning of the term ``involved in effecting,'' as discussed below.
    In the Registration Proposing Release we explained our view
generally that ``involved in effecting'' included ``persons on a
trading desk actively involved in effecting security-based swap
transactions.'' Upon further consideration, we did not mean to imply
(by use of the term ``actively'') that there is some minimum amount of
trading a person working on a trading desk must be involved with to be
considered ``involved in effecting'' security-based swap transactions.
In general, our focus is on the type of activity, not the amount of
activity. In addition, we believe it is preferable to use the term
``executing'' because it is more precise and eliminates the perceived
definitional circularity. We believe it is appropriate to clarify our
guidance in this manner because the totality of the guidance provided
covers other key aspects of the overall process of effecting security-
based swap transactions.
    We also are clarifying that by including ``persons assuring that
the SBS Entity's security-based swap business operates in compliance
with applicable regulations,'' we intended to include only ``persons
directly supervising'' the persons engaged in the other, specified
activities. We believe that it is appropriate to view the scope more
narrowly rather than to suggest that it includes all persons at an SBS
Entity in any way involved in assuring compliance with applicable
rules. Consequently, we believe the term ``involved in effecting
security-based swaps'' generally means engaged in functions necessary
to facilitate the SBS Dealer's or Major SBS Participant's security-
based swap business, including, but not limited to the following
activities: (1) Drafting and negotiating master agreements and
confirmations; (2) recommending security-based swap transactions to
counterparties; (3) being involved in executing security-based swap
transactions on a trading desk; (4) pricing security-based swap
positions; (5) managing collateral for the SBS Entity; and (6) directly
supervising persons engaged in the activities described in items (1)
through (5) above.
iii. Licensing
    Another commenter suggested that the Commission should establish
licensing requirements.\101\ After considering the comment, the
Commission is not at this time adopting licensing requirements for
associated persons of SBS Entities. While SROs generally establish
licensing and qualification requirements for those persons associated
with their member broker-dealers,\102\ there is no similar SRO
regulatory system for security based swap dealers.\103\ In addition,
the Commission does not have licensing or qualification requirements
for other market intermediaries registered with it that are not subject
to regulation by an SRO. Furthermore, as discussed above, the CCO
certification should provide assurance that associated persons of SBS
Entities that effect or are involved in effecting security-based swap
transactions are not statutorily disqualified by attesting that the
firm has itself performed this review. We believe that a CCO would have
incentive to provide an accurate certification due to potential
regulatory consequences. Consequently, we do not believe a licensing
scheme is necessary at this time, and we are not adopting a licensing
scheme.
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    \101\ See the 2011 Better Markets Letter, at 7-8.
    \102\ See e.g., FINRA's NASD Rule 1031 and FINRA Rule 1230(b)(6)
(applicable to associated persons of broker-dealers), and MSRB Rules
G-2 and G-3 (applicable to associated persons of municipal
securities brokers and municipal securities dealers). See also, 15
U.S.C. 78f(c)(3)(A) and (B), 15 U.S.C. 78o-3(g)(3)(A) and (B), and
15 U.S.C. 78o-4(b)(2)(A)(iii) authorizing such rules.
    \103\ See supra, discussion in Section II.A.1.ii.
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2. Questionnaire or Application for Employment and Background Checks
    As noted, to support the certification required by paragraph (a) of
proposed Rule 15Fb6-1, proposed Rule 15Fb6-1(b) would have required
that an SBS Entity obtain a questionnaire or application for employment
executed by each of its associated persons who effects or is involved
in effecting security based swaps on the SBS Entity's behalf which
would serve as a basis for a background check of the associated person
and be reviewed and signed by the SBS Entity's CCO (or his

or her designee). In addition, proposed Schedule G to Forms SBSE, SBSE-
A, and SBSE-BD would have required the SBS Entity's CCO to certify that
the applicant had performed background checks on all of its associated
persons who effect or are involved in effecting, or who will effect or
be involved in effecting, security-based swaps on its behalf and
determined that no associated person who effects or is involved in
effecting, or who will effect or be involved in effecting, security-
based swaps on its behalf is subject to statutory disqualification, as
defined in Section 3(a)(39) of the Exchange Act.
    One commenter stated that entities that screen employees pursuant
to other regulatory requirements may decide to register as SBS
Entities, and that the Commission should confirm that SBS Entities that
are also registered as broker-dealers or that have affiliated broker-
dealers may rely on the questionnaires and background checks they
conduct of associated persons under Commission and FINRA rules to
satisfy their Rule 15Fb6-1 background check obligation, and allow SBS
Entities that are not broker-dealers but are overseen by a prudential
regulator to rely on the questionnaires and background checks they
conduct pursuant to the requirements of their prudential regulator to
satisfy those obligations.\104\
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    \104\ See SIFMA Letter, at 9.
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    The rules as adopted do not specify what steps an SBS Entity should
take to perform a background check.\105\ The required employment
questionnaire or application includes a significant amount of
information that can be helpful to determine whether an associated
person may be subject to a statutory disqualification.\106\ In
addition, we believe financial institutions already take steps to
verify the background of their employees, such as by calling past
employers and checking references. In some cases calling references and
past employers may be sufficient, while in other circumstances a firm
may decide to take additional steps. We believe it is important for
firms to have flexibility to perform background checks, as long as
those checks provide them with sufficient comfort to certify that none
of the SBS Entity's employees who effect or are involved in effecting
security-based swaps on the SBS Entity's behalf are subject to
statutory disqualification, unless otherwise specifically provided by
rule, regulation or order of the Commission.\107\
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    \105\ See infra, Section II.B.3.
    \106\ See infra, footnote 120 and accompanying text. See also,
17 CFR 240-17a-3(a)(12)(i) and proposed Rule 18a-5(b)(8)(i).
    \107\ See, Rule 194 Proposing Release.
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    As noted, the rules as adopted do not specify what steps an SBS
Entity should take to perform a background check. As such, with respect
to an SBS Entity whose associated persons are also associated with an
affiliated broker-dealer, CFTC-registered entity, or bank, there may be
circumstances where the SBS Entity and its CCO are able to rely on
current background checks of dual employees performed by an affiliated,
regulated entity, as long as those checks provide them with sufficient
comfort to certify that none of the SBS Entity's employees who effect
or are involved in effecting security-based swaps on the SBS Entity's
behalf are subject to statutory disqualification, unless otherwise
specifically provided by rule, regulation or order of the
Commission.\108\
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    \108\ As we have amended paragraph (b) of Rule 15Fb6-2 to
require that the CCO, or his or her designee, sign the questionnaire
or application that the SBS Entity is required to obtain pursuant to
the relevant recordkeeping rule applicable to such SBS Entity, we
believe it would be appropriate for the Commission to address the
issue of whether an SBS Entity can fulfill its obligation to obtain
questionnaires or applications for employment by relying on other
documents in the release that will address the recordkeeping
requirements for SBS Entities. See infra, footnotes 120 and 121 and
accompanying text for a discussion of Rule 15Fb6-2(b). See also,
Rule 194 Proposing Release.
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    One commenter stated that the statutory disqualification
requirements would apply to a foreign registered SBS Entity as a whole
(i.e., an entity-level, as opposed to transaction-level, requirement),
without regard to the identity of a given counterparty, resulting in
situations where non-U.S. employees of non-U.S. SBS Entities who do not
interact with U.S. customers would be required to submit to U.S.
background checks for statutory disqualification purposes.\109\ This
commenter indicated that this approach diverges from that adopted by
the CFTC, which it states does not apply its statutory disqualification
requirements to associated persons of its registrants who engage in
activity outside the U.S. and limit such activity to customers located
outside the U.S.\110\ This commenter recommended that the Commission
re-categorize licensing and statutory disqualification requirements as
transaction-level requirements because limiting background checks to
personnel interacting with U.S. persons would help eliminate potential
conflicts with local privacy laws, which the commenter states in some
cases may prohibit background checks for employees based abroad.\111\
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    \109\ See IIB letter, at 20.
    \110\ Id.
    \111\ Id.
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    As noted in Section II.A.1.vi., in the Cross Border Proposing
Release the Commission proposed Rule 3a71-5 to facilitate certain
substituted compliance determinations by the Commission for foreign SBS
Dealers.\112\ Paragraph (a)(3) of that proposed rule specified that the
Commission would not make a substituted compliance determination with
respect to registration requirements described in Sections 15F(a)-(d)
of the Exchange Act and the rules and regulations thereunder. As
discussed above, the Commission continues to believe that substituted
compliance should not be available for SBS Entity Registration.\113\
The Commission holds this view with respect to all aspects of SBS
Entity registration, including the requirements relating to statutory
disqualification.
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    \112\ See Cross-Border Proposing Release, at 31207-8. See also
Cross-Border Proposing Release, at 31015-31016.
    \113\ See supra, Section II.A.1.vi.
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    Exchange Act Section 15F(b)(6) generally prohibits an SBS Entity,
except as otherwise permitted by rule, regulation or order of the
Commission, from permitting any person associated with the SBS Entity
who is subject to a ``statutory disqualification'' to effect or be
involved in effecting security-based swaps on behalf of the SBS Entity
if the SBS Entity knew, or in the exercise of reasonable care should
have known, of the statutory disqualification. Rule 15Fb6-2(a) as
adopted states that no registered SBS Entity shall act as an SBS Entity
unless it has certified that no person associated with such SBS Entity
who is effecting or involved in effecting security-based swaps on
behalf of the SBS Entity is subject to statutory disqualification,
unless otherwise specifically provided by rule, regulation or order of
the Commission. Rule 15Fb6-2(b) as adopted further states that (1) to
support the certification required by paragraph (a), the SBS Entity's
CCO, or his or her designee, shall review and sign the questionnaire or
application for employment, which the SBS Entity is required to obtain
pursuant to the relevant recordkeeping rule applicable to such SBS
Entity, executed by each associated person who is a natural person and
who effects or is involved in effecting security based swaps on the SBS
Entity's behalf; and (2) the questionnaire or application shall serve
as a basis for a background check of the associated person to verify

that the person is not subject to statutory disqualification.\114\
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    \114\ See also Form SBSE-C and Rule 15Fb6-2(b).
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    The requirements in paragraph (b) of Rule 15Fb6-2 are designed to
support the CCO Certification Regarding Associated Persons required by
paragraph (a) of the rule, and the CCO Certification Regarding
Associated Persons is designed to provide the Commission with
representations regarding the applicant's compliance with the statutory
disqualification provision in Section 15F(b)(6) of the Exchange Act. We
believe that these requirements are important aspects of our
registration regime for SBS Entities, as they will in part help ensure
that SBS Entities are performing the necessary diligence to support the
requirements of Exchange Act Section 15F(b)(6). The requirements in
Rule 15Fb6-2(b) regarding questionnaires or applications and background
checks are important elements of each SBS Entity's determination with
respect to whether its associated persons that effect or are involved
in effecting security-based swap transactions are subject to statutory
disqualifications, and can serve as an effective tool for the
Commission to use to assess the SBS Entity's diligence with respect to,
and compliance with, the requirements of paragraph (a) of the rule. The
Commission has considered the function that these statutory
disqualification requirements play in the effective oversight and
regulation of SBS Entities and has concluded that entity-level
classification--and application to all associated persons--will provide
for more effective oversight and regulation. Thus, while the Commission
has taken into consideration the commenter's concerns regarding the
potential impact of certain foreign privacy laws, we are not convinced
at this time of a need or basis to provide an exclusion for SBS
Entities from the statutory disqualification requirements with respect
to certain of its associated persons that are natural persons who
effect or are involved in effecting security-based swaps on its behalf.
Accordingly, under our final rules, we continue to treat these
requirements as entity-level requirements applicable to all associated
persons of the registered foreign SBS Entity that effect or are
involved in effecting security-based swap transactions.
3. Final Rule for Associated Person Certification
    Therefore, for the reasons discussed above, we are adopting the
language proposed as Rule 15Fb6-1 as Rule 15Fb6-2 with some