[Federal Register Volume 86, Number 66 (Thursday, April 8, 2021)]
[Notices]
[Pages 18341-18349]
[FR Doc No: 2021-07254]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91477; File No. S7-22-20]

Reopening of Comment Period for Order Proposing Conditional
Substituted Compliance in Connection With Certain Requirements
Applicable to Non-U.S. Security-Based Swap Dealers and Major Security-
Based Swap Participants Subject to Regulation in the French Republic

AGENCY: Securities and Exchange Commission.

ACTION: Reopening of comment period.

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SUMMARY: The Securities and Exchange Commission (``Commission'') is
reopening the comment period for its proposed conditional substituted
compliance order, published in the Federal Register on December 29,
2020, in connection with certain requirements applicable to non-U.S.
security-based swap dealers and major security-based swap participants
subject to regulation in the French Republic (``Proposed Order''). The
reopening of the comment period is intended to allow interested persons
time to analyze and comment upon potential changes to the Proposed
Order and additional questions related to the Proposed Order.

DATES: The comment period is re-opened until May 3, 2021.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/submitcomments.htm);
     Send an email to<EMAIL_ADDRESS>Please include
File Number S7-22-20; or
     Use the Federal Rulemaking portal (http://www.regulations.gov). Follow the instructions for submitting comments.

Paper Comments

     Send paper comments to Vanessa A. Countryman, Secretary,
Securities and Exchange Commission, 100 F Street NE, Washington, DC
20549-1090.

All submissions should refer to File Number S7-22-20. This file number
should be included on the subject line if email is used. To help us
process and review your comments more efficiently, please use only one
method. We will post all comments on the Commission's internet website
(http://www.sec.gov/rules/other.shtml). Typically, comments are also
available for website viewing and printing in the Commission's Public
Reference Room, 100 F Street NE, Washington, DC 20549, on official
business days between the hours of 10 a.m. and 3 p.m. Due to pandemic
conditions, however, access to the Commission's public reference room
is not permitted at this time. All comments received will be posted
without change; we do not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly.

FOR FURTHER INFORMATION CONTACT: Carol M. McGee, Assistant Director
Office of Derivatives Policy, Division of Trading and Markets, at (202)
551-5870, Securities and Exchange Commission, 100 F Street NE,
Washington, DC 20549.

SUPPLEMENTARY INFORMATION:

I. Background

    The French Autorit[eacute] des March[eacute]s Financiers (``AMF'')
and the Autorit[eacute] de Contr[ocirc]le Prudentiel et de
R[eacute]solution (``ACPR''), the French financial authorities, have
submitted a ``substituted compliance'' application requesting that the
Commission determine, pursuant to the Securities Exchange Act of 1934
(``Exchange Act'') rule 3a71-6, that security-based swap dealers and
major security-based swap participants (``SBS Entities'') subject to
regulation in France conditionally may satisfy requirements under the
Exchange Act by complying with comparable French and European Union
(``EU'') requirements.\1\ In their application, the AMF and the ACPR
(``French Authorities'') sought substituted compliance in connection
with certain Exchange Act requirements related to risk control, capital
and margin, internal supervision and compliance, counterparty
protection, recordkeeping, reporting and notification. The application
incorporated comparability analyses regarding applicable French and EU
law, as well as information regarding French supervisory and
enforcement frameworks.
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    \1\ See Letter from Robert Oph[egrave]le, Chairman, AMF, and
Denis Beau, Chairman, ACPR, to Vanessa Countryman, Secretary,
Commission, dated Nov. 6, 2020 (``French Authorities'
Application''). The application is available on the Commission's
website at: https://www.sec.gov/files/full-french-application.pdf.
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    On December 22, 2020, the Commission published a notice of the
French Authorities' completed application, accompanied by a Proposed
Order to conditionally grant substituted compliance in connection with
the application.\2\ The Proposed Order incorporated a number of
conditions to tailor the scope of substituted compliance consistent
with the prerequisite that relevant French and EU requirements produce
regulatory outcomes that are comparable to relevant requirements under
the Exchange Act.
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    \2\ Exchange Act Release No. 90766 (Dec. 22, 2020), 85 FR 85720
(Dec. 29, 2020) (``French Substituted Compliance Notice and Proposed
Order'').
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II. Reopening of Comment Period

    As a result of comments received \3\ and upon further reflection,
the Commission is reopening the comment period for the Proposed Order
until May 3, 2021. Commenters may submit, and the Commission will
consider, comments on any aspect of the Proposed Order. In addition to
the questions raised in the Proposed Order, the Commission specifically
seeks comments on the issues below and potential changes to the
Proposed Order (defined terms can be found in the Proposed Order).
Commenters should also consider the approaches taken in connection with
the application and proposed order for substituted compliance for the
United Kingdom \4\ when answering these questions.
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    \3\ See Letter from Kyle Brandon, Managing Director, Head of
Derivative Policy, SIFMA (Jan. 25, 2021) (``SIFMA Letter''), letter
from Wim Mijs, Chief Executive Officer, European Banking Federation
(Jan. 25, 2021) (``EBF Letter'') (generally supporting the SIFMA
letter), and Letter from Etienne Barel, Deputy Chief Executive
Officer, French Banking Federation (Jan. 25, 2021) (``FBF Letter'').
Comments may be found on the Commission's website at: https://www.sec.gov/comments/s7-22-20/s72220.htm.
    \4\ See Notice of Substituted Compliance Application Submitted
by the United Kingdom Financial Conduct Authority in Connection with
Certain Requirements Applicable to Security-Based Swap Dealers and
Major Security-Based Swap Participants Subject to Regulation in the
United Kingdom; Proposed Order, Exchange Act Release No. 91476 (Apr.
5, 2021) (``Proposed UK Order'').
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A. EMIR-Related General Conditions

    Commenters raised concerns regarding the proposed conditions
associated with substituted compliance for trade acknowledgement and
verification requirements and trading relationship documentation
requirements.\5\ They particularly requested that those parts of the
final Order not incorporate proposed conditions requiring compliance
with certain provisions under MiFID, arguing that those MiFID-related
conditions in practice would prevent SBS Entities with branches in
other EU countries from relying on substituted compliance for those
requirements, and that compliance with proposed EMIR conditions would
be sufficient to

produce the requisite regulatory outcomes.\6\
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    \5\ See SIFMA Letter at 3-6, FBF Letter at 2.
    \6\ Id. Under the proposal, substituted compliance for trade
acknowledgment and for trading relationship documentation in part
would require that relevant SBS Entities (``Covered Entities'' as
defined in the proposed Order) comply with certain requirements
under MiFID (``Markets in Financial Instruments Directive,''
Directive 2014/65/EU) and the French implementation of MiFID, and
also comply with certain requirements under EMIR (``European Market
Infrastructure Regulation,'' Regulation (EU) 648/2012). See paras.
(a)(2) and (a)(5) to the proposed Order.
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    As discussed below, the Commission believes that based on the
issues raised by those commenters, it may be appropriate for the
portions of the final Order related to trade acknowledgment and
verification and to trading relationship documentation not to include
the MiFID-related conditions and instead to rely solely on EMIR
conditions. Any such heightened reliance on EMIR, however, highlights
the need for safeguards to ensure that there will be no opportunity for
gaps that may prevent the EMIR provisions in practice from producing
regulatory outcomes consistent with those of the Exchange Act rules.
    Accordingly, upon further consideration, the Commission believes
that it may be useful for the final Order to incorporate two additional
general conditions to promote certainty that EMIR will apply and help
preclude gaps between the regulatory outcomes associated with Exchange
Act requirements and those associated with the relevant EMIR
provisions.\7\
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    \7\ Addition of two new EMIR-related general conditions
potentially would necessitate renumbering of certain of the extant
proposed general conditions, and the addition of technical
clarifying language to the captions for certain of the other
proposed general conditions (e.g., recaptioning proposed general
conditions (a)(1) through (a)(3) to the Proposed Order so they
specifically refer to MiFID, and recaptioning of proposed general
condition (a)(4) so it specifically refers to CRD/CRR).
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    Potential counterparty-related EMIR condition. First, it may be
useful for the final Order to incorporate a new general condition to
address the fact that the ``financial counterparty'' and ``non-
financial counterparty'' definitions that trigger the application of
the relevant EMIR provisions in part are predicated on the Covered
Entity and its counterparty being either subject to certain
authorizations consistent with its activities or a legal entity
established in the EU.\8\ To help ensure that the relevant EMIR
requirements would produce the requisite regulatory outcomes regardless
of a counterparty's status under those definitions, the Commission is
considering adding a general condition to provide that, for each part
of the final Order that requires compliance with EMIR-related
requirements, if the Covered Entity's relevant security-based swap
counterparty does not fall within the relevant ``financial
counterparty'' or ``non-financial counterparty'' definitions, the
Covered Entity must comply with the applicable condition as if the
counterparty were a ``financial counterparty'' or ``non-financial
counterparty'' consistent with the counterparty's business.\9\
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    \8\ See EMIR art. 2(8) (defining ``financial counterparty'' by
reference to certain investment firms, insurers and other types of
institutions authorized pursuant to various EU directives), 2(9)
(defining ``non-financial counterparty'' as an ``undertaking''
established in the EU that is not a financial counterparty).
    \9\ In other words, the Covered Entity would be subject to the
relevant requirements under EMIR even if the counterparty is not
authorized pursuant to EU law as anticipated by the EMIR art. 2(8)
``financial counterparty'' definition, or if the counterparty is not
an ``undertaking'' (such as by virtue of being a natural person), or
is not established in the EU (by virtue of being a U.S. person or
otherwise being established in some non-EU jurisdiction), as
anticipated by the EMIR art. 2(9) ``non-financial counterparty''
definition. This approach appears to be consistent with European
guidance. See European Securities and Markets Authority, ``Questions
and Answers: Implementation of the Regulation (EU) No 648/2012 on
OTC derivatives, central counterparties and trade repositories
(EMIR)'' (https://www.esma.europa.eu/sites/default/files/library/esma70-1861941480-52_qa_on_emir_implementation.pdf) answer 5(a)
(stating that compliance with the EMIR confirmation requirement
necessitates that the counterparties must reach a legally binding
agreement to all terms of the OTC derivative contract, and that the
EMIR RTS ``implies'' that both parties must comply and agree in
advance to a specific process to do so); answer 12(b) (stating that
where an EU counterparty transacts with a third country entity, the
EU counterparty generally must ensure that the EMIR requirements for
portfolio reconciliation, dispute resolution, timely confirmation
and portfolio compression are met for the relevant portfolio and/or
transactions even though the third country entity would not itself
be subject to EMIR; this is subject to special processes when the
European Commission has declared the third country requirements to
be comparable to EU requirements).
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    Potential product-related conditions. It may also be useful for the
final Order to account for the facts that the relevant trade
acknowledgement and verification and trading relationship documentation
rules under the Exchange Act do not apply to security-based swaps
cleared by a clearing agency registered with the Commission (or exempt
from registration), while the analogous EMIR provisions exclude
instruments that are cleared by a central counterparty that has been
authorized or recognized to clear derivatives contracts in the EU. As a
result, instruments that have been cleared at an EU-authorized or EU-
recognized central counterparty neither would be excluded from the
application of those Exchange Act rules nor would be subject to the
EMIR requirements that otherwise would underpin substituted
compliance--making direct compliance problematic but compliance with
the conditions of a positive substituted compliance order unworkable.
To bridge that gap and help ensure that substituted compliance is not
precluded in connection with instruments that have been cleared in the
EU, the Commission is considering adding a new general condition that,
for each part of the final Order that requires compliance with EMIR-
related conditions: (i) The relevant security-based swap must either be
an ``OTC derivative'' or ``OTC derivative contract'' for purposes of
EMIR \10\ that has not been cleared and otherwise is subject to the
provisions of the relevant requirements under EMIR, or (ii) the
relevant security-based swap has been cleared by a central counterparty
that has been authorized or recognized to clear derivatives contracts
in the EU.\11\
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    \10\ See EMIR art. 2(7) (defining those terms by reference to
``a derivative contract the execution of which'' does not take place
on a regulated market or certain third-party market as defined in
the 2004 iteration of MiFID).
    \11\ Prong (i) to this potential new condition would require
uncleared instruments to fall within the ambit of the EMIR
requirements at issue. The alternative prong (ii) would be satisfied
when cleared instruments fall outside the ambit of those EMIR
requirements by virtue of being cleared in the EU, akin to the
Exchange Act rules' exclusion for security-based swaps cleared by
clearing agencies registered with the Commission.
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    Commenters are invited to address whether additional general
conditions of this nature are appropriate to help ensure that EMIR-
related conditions to the final Order will apply in an appropriate
scope, particularly in connection with trade acknowledgment and
verification requirements and trading relationship documentation
requirements. Would general conditions of the type discussed above be
appropriate to help foreclose substituted compliance when there are
gaps inconsistent with the comparability of regulatory outcomes? Would
different approaches be more effective at achieving that goal? If so,
please describe.

B. Risk Control Requirements

    The proposal in part would condition substituted compliance for
Exchange Act rule 15Fi-2 trade acknowledgment and verification
requirements and rule 15Fi-5 trading relationship documentation
requirements on firms complying with certain requirements under MiFID
article 25 (including the French implementation of those MiFID
requirements) and under EMIR. Commenters expressed the view that the
EMIR-based requirements standing

alone would be sufficient to produce regulatory outcomes that are
comparable to those associated with the Exchange Act rules, and that
the conditions should not incorporate references to MiFID
provisions.\12\
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    \12\ See SIFMA Letter at 2-6, FBF Letter at 2. Under the
Proposed Order, substituted compliance in connection with trade
acknowledgment and verification requirements in part would be
conditioned on an entity's compliance with EMIR article 11(1)(a) and
EMIR RTS article 12, which jointly set forth a bilateral
confirmation requirement. Substituted compliance in connection with
trading relationship requirements in part would be conditioned on
compliance with EMIR Margin RTS article 2, which addresses risk
management procedures related to the exchange of collateral,
including procedures related to the terms of all necessary
agreements to be entered into by counterparties (e.g., payment
obligations, netting conditions, events of default, calculation
methods, transfers of rights and obligations upon termination, and
governing law).
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    The commenter concern regarding the application of MiFID arises
from application of a proposed cross-border condition providing that if
responsibility for ensuring compliance with any provision of MiFID (or
EU or French implementing requirement) that is listed as a condition
for substituted compliance is allocated to an authority in a member
state of the EU in whose territory a Covered Entity provides a service,
the AMF or ACPR must be the authority responsible for supervision and
enforcement of that provision.\13\ In the commenter's view, this EU
cross-border condition means that conditioning substituted compliance
on Covered Entities also having to comply with MiFID confirmation and
documentation requirements in practice would undermine the availability
of substituted compliance for Covered Entities that have branches in EU
Member States for which the Commission has not entered into an
applicable substituted compliance memorandum of understanding.\14\
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    \13\ See paragraph (a)(8) to the proposed Order (``EU cross-
border condition''). In practice (pursuant to MiFID article 35),
this allocation of oversight applies to requirements pursuant to
MiFID article 25 (``assessment of suitability and appropriateness
and reporting to clients'') as well as certain other MiFID
provisions not relevant here.
    \14\ See SIFMA Letter at 2-6. In the commenter's view,
application of those MiFID article 25 conditions in connection with
trade acknowledgment and verification requirements and trading
relationship documentation requirements would ``in practice lead to
an untenable patchwork of substituted compliance.'' See SIFMA letter
at 3. The commenter further explained that SBS Entities ``operating
branches throughout the EU'' would not be able to avail themselves
of substituted compliance in connection with these requirements
``unless authorities or regulated SBS Entities in every or nearly
every one of the 27 EU Member States submit their own substituted
compliance applications covering local branches of SBS Entities, and
the Commission reviews and responds to those applications and enters
into memoranda of understanding [ ] in each of these Member
States.'' The same problem does not arise in connection with
requirements under EMIR, which would not allocate oversight of a
French entity's compliance to authorities in other EU Member States.
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    In light of those commenters' concerns that substituted compliance
for trade acknowledgment and verification and for trading relationship
documentation as proposed would be curtailed as a result of the
interplay between the MiFID provisions and the EU cross-border
condition, the Commission is considering whether the EMIR requirements
standing alone produce comparable results such that the Commission
appropriately may remove those MiFID provisions as prerequisites to
substituted compliance in connection with the trade acknowledgment and
verification and trading relationship documentation requirements under
the Exchange Act.\15\
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    \15\ For trade acknowledgment and verification, proposed
paragraph (b)(2) in part particularly would require compliance with
MiFID article 25(6) (requiring that investment firms provide certain
reports to clients), and MiFID Org Reg articles 59-61 (addressing
contents of reports with specificity). EMIR article 11(1)(a) and
EMIR RTS article 12, in contrast, specify more general conformation
requirements applicable to both counterparties to a transaction. For
trading relationship documentation requirements, proposed paragraph
(b)(5) in part particularly would require compliance with MiFID Org
Reg article 25(5) (requiring investment firms to establish a record
regarding the rights and obligations of parties and other terms of
service), and MiFID Org Reg articles 24, 58, 73 and applicable parts
of Annex I (addressing internal audit, client agreements and
recordkeeping). EMIR Martin RTS article 2, in contrast, encompasses
collateral-related risk management procedures that in part require
counterparties to specify the terms of all necessary agreements to
be entered into by counterparties.
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    Under such an approach, substituted compliance in connection with
Exchange Act rule 15Fi-2 trade acknowledgment and verification
requirements would be conditioned solely on compliance with the
confirmation provisions of EMIR article 11(1)(a) and EMIR RTS article
12.
    Moreover, under such an approach, substituted compliance in
connection with Exchange Act rule 15Fi-5 trading relationship
documentation requirements in part would be conditioned on compliance
with the collateral-related risk management procedure provisions of
EMIR Margin RTS article 2 (as proposed). In addition, to further
promote comparability with the rule 15Fi-5(b)(2) provisions requiring
that trading relationship documentation incorporate trade
acknowledgements and verification, substituted compliance under such an
approach also may be conditioned on compliance with the confirmation
provisions of EMIR article 11(1)(a) and EMIR RTS article 12.
    Commenters are invited to address whether MiFID requirements should
be removed from the conditions for substituted compliance in connection
with trade acknowledgment and verification requirements and trading
relationship documentation requirements. Would the proposed EMIR
conditions (and the potential additional EMIR condition related to
trading relationship documentation) be sufficient to produce regulatory
outcomes that are comparable to those associated with the Exchange Act
rules, particularly if the new general conditions addressed in part
II.A above also are incorporated as part of the final Order? If so,
please explain. If not, please explain.

C. Capital

    The Proposed Order did not contain any proposed conditions for
substituted compliance with respect to the capital requirements of
Exchange Act section 15F(e) and Exchange Act rule 18a-1 and its
appendices (collectively ``Exchange Act rule 18a-1'').\16\ In the
Proposed Order, the Commission, however, requested comment on whether
there are any conditions that should be applied to substituted
compliance for these capital requirements to promote comparable
regulatory outcomes.\17\ The Commission also requested comment on
whether it should consider conditions related to: (1) Maintaining a
minimum amount of liquid assets; (2) imposing a specific liquidity
requirement; and (3) maintaining minimum equity capital at least equal
to the minimum fixed-dollar capital requirements under Exchange Act
rule 18a-1.\18\ In addition, the Commission requested comment on the
types of firms in France that would be relying on substituted
compliance for capital, and whether the balance sheets of these
entities were primarily composed of liquid or illiquid assets.\19\
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    \16\ See Proposed Order, 85 FR at 85726.
    \17\ See Proposed Order, 85 FR at 85737.
    \18\ Id.
    \19\ Id.
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    Commenters supported the proposed approach of making a positive
substituted compliance determination with respect to Exchange Act rule
18a-1. Commenters, however, stated that imposing any conditions on
applying substituted compliance to Exchange Act rule 18a-1 was neither
necessary nor appropriate.\20\ For example, one commenter expressed
concern that requiring a Covered Entity to maintain a minimum amount of
liquid assets

would impose unnecessary burdens.\21\ This commenter believed that
imposing additional liquidity conditions would be duplicative of, and
(depending on their design) inconsistent with applicable EU and French
capital requirements, since these Covered Entities are already subject
to the liquidity coverage ratio (``LCR''), the net stable funding ratio
(``NSFR''), and an internal liquidity adequacy assessment process
(``liquidity assessment process'').\22\ This commenter also noted that
Covered Entities are subject to bank-style resolution regimes, which
the commenter believed makes their liquidity risks less significant
than other SBS Entities.\23\ This commenter also noted that certain
Covered Entities will have access to short-term liquidity through
relevant EU Member State central banks.\24\ This commenter also
expressed concern, that absent an additional comment period, any
definitions contained in a final substituted compliance determination
would be adopted without the benefit of public comment.\25\ Finally,
this commenter also stated that imposing a liquidity condition would be
similar to the Commission imposing a net liquid assets test on Covered
Entities, in contrast to EU policy makers applying a risk-based
approach to capital. The commenter believed this would potentially
change the ways these entities conduct business in a manner that may be
inconsistent with their home country regulation.\26\
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    \20\ See SIFMA Letter at 11; EBF Letter at 4; FBF Letter at 4.
    \21\ See SIFMA Letter at 11.
    \22\ See SIFMA Letter at 12.
    \23\ See SIFMA Letter at 12.
    \24\ See SIFMA Letter at 12.
    \25\ Id.
    \26\ See SIFMA Letter at 12-13.
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    The Commission continues to consider whether it would be
appropriate to impose additional conditions with respect to applying
substituted compliance to Exchange Act rule 18a-1. In this regard, the
Commission is seeking further comment about the concerns raised by the
commenters and potential capital conditions. The reasons why the
Commission continues to consider additional capital conditions are
discussed below.
    As a commenter noted, the capital standard of Exchange Act rule
18a-1 is the net liquid assets test. This is the same capital standard
that applies to broker-dealers under Exchange Act rule 15c3-1. The net
liquid assets test is designed to promote liquidity. In particular,
Exchange Act rule 18a-1 allows an SBS Entity to engage in activities
that are part of conducting a securities business (e.g., taking
securities into inventory) but in a manner that places the firm in the
position of holding at all times more than one dollar of highly liquid
assets for each dollar of unsubordinated liabilities (e.g., money owed
to customers, counterparties, and creditors).\27\ For example, Exchange
Act rule 18a-1 allows securities positions to count as allowable net
capital, subject to standardized or internal model-based haircuts. The
rule, however, does not permit most unsecured receivables to count as
allowable net capital. This aspect of the rule severely limits the
ability of SBS Entities to engage in activities, such as
uncollateralized lending, that generate unsecured receivables. The rule
also does not permit fixed assets or other illiquid assets to count as
allowable net capital, which creates disincentives for SBS Entities to
own real estate and other fixed assets that cannot be readily converted
into cash. For these reasons, Exchange Act rule 18a-1 incentivizes SBS
Entities to confine their business activities and devote capital to
security-based swap activities.
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    \27\ See, e.g., Exchange Act Release No. 8024 (Jan. 18, 1967),
32 FR 856 (Jan. 25, 1967) (``Rule 15c3-1 (17 CFR 240.15c3-1) was
adopted to provide safeguards for public investors by setting
standards of financial responsibility to be met by brokers and
dealers. The basic concept of the rule is liquidity; its object
being to require a broker-dealer to have at all times sufficient
liquid assets to cover his current indebtedness.'') (footnotes
omitted); Exchange Act Release No. 10209 (June 8, 1973), 38 FR 16774
(June 26, 1973) (Commission release of a letter from the Division of
Market Regulation) (``The purpose of the net capital rule is to
require a broker or dealer to have at all times sufficient liquid
assets to cover its current indebtedness. The need for liquidity has
long been recognized as vital to the public interest and for the
protection of investors and is predicated on the belief that
accounts are not opened and maintained with broker-dealers in
anticipation of relying upon suit, judgment and execution to collect
claims but rather on a reasonable demand one can liquidate his cash
or securities positions.''); Exchange Act Release No. 15426 (Dec.
21, 1978), 44 FR 1754 (Jan. 8, 1979) (``The rule requires brokers or
dealers to have sufficient cash or liquid assets to protect the cash
or securities positions carried in their customers' accounts. The
thrust of the rule is to insure that a broker or dealer has
sufficient liquid assets to cover current indebtedness.''); Exchange
Act Release No. 26402 (Dec. 28, 1989), 54 FR 315 (Jan. 5, 1989)
(``The rule's design is that broker-dealers maintain liquid assets
in sufficient amounts to enable them to satisfy promptly their
liabilities. The rule accomplishes this by requiring broker-dealers
to maintain liquid assets in excess of their liabilities to protect
against potential market and credit risks.'') (footnote omitted).
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    The net liquid assets test is imposed through the mechanics of how
an SBS Entity is required to compute net capital pursuant to Exchange
Act rule 18a-1. The first step is to compute the SBS Entity's net worth
under generally accepted accounting principles. Next, the SBS Entity
must make certain adjustments to its net worth to calculate net
capital, such as deducting illiquid assets and taking other capital
charges and adding qualifying subordinated loans.\28\ The amount
remaining after these deductions is defined as ``tentative net
capital.'' Exchange Act rule 18a-1 prescribes a minimum tentative net
capital requirement of $100 million for SBS Entities approved to use
models to calculate net capital. The final step in computing net
capital is to take prescribed percentage deductions (standardized
haircuts) or model-based deductions from the mark-to-market value of
the SBS Entity's proprietary positions (e.g., securities, money market
instruments, and commodities) that are included in its tentative net
capital. The amount remaining is the firm's net capital, which must
exceed the greater of $20 million or a ratio amount. An SBS Entity that
is meeting its minimum net capital requirement will be in the position
where each dollar of unsubordinated liabilities is matched by more than
a dollar of highly liquid assets.
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    \28\ See 17 CFR 240.15c3-1(c)(2).
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    In comparison, Covered Entities in France are subject to capital
requirements applicable to prudentially regulated entities based on the
international capital standard for banks (the ``Basel capital
standard'').\29\ The Basel capital standard counts as capital assets
that Exchange Act rule 18a-1 would exclude (e.g., loans and most other
types of uncollateralized receivables, furniture and fixtures, real
estate). The Basel capital standard accommodates the business of
banking: Making loans (including extending unsecured credit) and taking
deposits. While the Covered Entities that will apply substituted
compliance with respect to Exchange Act rule 18a-1 will not be banks,
the Basel capital standard allows them to count illiquid assets such as
real estate and fixtures as capital. It also allows them to treat
unsecured receivables related to activities beyond dealing in security-
based swaps as capital notwithstanding the illiquidity of these assets.
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    \29\ See BCBS, The Basel Framework, available at: https://www.bis.org/basel_framework/.
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    Further, one critical example of the difference between the
requirements of Exchange Act rule 18a-1 and the Basel capital standard
relates to the treatment of initial margin with respect to security-
based swaps and swaps. Under French margin requirements, Covered
Entities will be required to post initial margin to counterparties
unless an

exception applies.\30\ Under Exchange Act rule 18a-1, an SBS Entity
cannot count as capital the amount of initial margin posted to a
counterparty unless it enters into a special loan agreement with an
affiliate.\31\ The special loan agreement requires the affiliate to
fund the initial margin amount and the agreement must be structured so
that the affiliate--rather than the SBS Entity--bears the risk that the
counterparty may default on the obligation to return the initial
margin. The reason for this restrictive approach to initial margin
posted away is that it ``would not be available [to the SBS Entity] for
other purposes, and, therefore, the firm's liquidity would be
reduced.'' \32\ Under the Basel capital standard, a Covered Entity can
count initial margin posted away as capital without the need to enter
into a special loan arrangement with an affiliate. Consequently,
because of the ability to include illiquid assets and margin posted
away as capital, Covered Entities subject to the Basel capital standard
may have less balance sheet liquidity than SBS Entities subject to
Exchange Act rule 18a-1.
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    \30\ Exchange Act rule 18a-3 does not require SBS Entities to
post initial margin (though it does not prohibit the practice).
    \31\ See 84 FR at 43887-88.
    \32\ See id. at 43887.
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    To address this potential liquidity difference, the Commission is
seeking comment on whether substituted compliance with respect to
Exchange Act rule 18a-1 should be subject to the conditions that a
Covered Entity: (1) Maintains an amount of assets that are allowable
under Exchange Act rule 18a-1, after applying applicable haircuts under
the Basel capital standard, that equals or exceeds the Covered Entity's
current liabilities coming due in the next 365 days; (2) makes a
quarterly record listing: (a) The assets maintained pursuant to the
first condition, their value, and the amount of their applicable
haircuts; and (b) the aggregate amount of the liabilities coming due in
the next 365 days; (3) maintains at least $100 million of equity
capital composed of highly liquid assets, as defined in the Basel
capital standard; and (4) includes its most recent statement of
financial condition (i.e., balance sheet) filed with its local
supervisor whether audited or unaudited with its written notice to the
Commission of its intent to rely on substituted compliance. This
potential approach to substituted compliance is illustrated in the
Proposed UK Order.\33\
---------------------------------------------------------------------------

    \33\ See para. (c)(1)(ii) of the Proposed UK Order.
---------------------------------------------------------------------------

    The purpose of the potential conditions would be to address the
concern that, while the Basel capital standard may contain requirements
designed to address liquidity such as the LCR and NSFR, the Basel
capital standard does not impose a net liquid assets test that requires
a Covered Entity to maintain more than one dollar of highly liquid
assets for each dollar of unsubordinated liabilities. The Commission
requests comment on how the liquidity provisions in the Basel capital
standard (the LCR, NSFR, and liquidity assessment process) impact the
liquidity of Covered Entities that would apply substituted compliance
with respect to Exchange Act rule 18a-1 (i.e., nonbanks). Do these
requirements in practice result in Covered Entities maintaining more
than one dollar of highly liquid assets for each dollar of
unsubordinated liabilities? If so, explain why. If not, explain why
not.
    A commenter stated that certain non-bank entities in the European
Union have access to short-term liquidity through relevant Central
Banks.\34\ The Commission requests comment on whether Covered Entities
that are not banks have access to short-term liquidity through Central
Bank facilities in France or Europe that are available to banks. Please
identify and describe each facility that is available to nonbank
Covered Entities, including any limitations on their ability to access
the facility.
---------------------------------------------------------------------------

    \34\ See SIFMA Letter at 12.
---------------------------------------------------------------------------

    The Commission also requests comment on how the potential
additional capital conditions compare to any existing capital
requirements under the Basel capital standards. For example, are there
differences in the frequency or nature of calculations under the Basel
capital standards?
    The Commission continues to request comment on and seek information
about the assets, liabilities, and capital of the Covered Entities that
would apply substituted compliance with respect to Exchange Act rule
18a-1. What are the primary business lines engaged in by these entities
and what types of assets and liabilities do they typically carry on
their balance sheets? Are the balance sheets of these entities
primarily composed of liquid or illiquid assets? The Commission would
use this information to analyze the liquidity of these entities in the
context of considering the potential additional capital conditions. For
example, do the Covered Entities that would apply substituted
compliance with respect to Exchange rule 18a-1 engage primarily in a
securities business? If so, are their balance sheets similar to those
of U.S. broker-dealers that deal in securities in terms of holding
highly liquid assets? If their balance sheets are similar to U.S.
broker-dealers, are the additional capital conditions discussed above
necessary? Alternatively, would the additional capital conditions serve
to ensure that these firms do not engage in non-securities business
activities that could impair their liquidity? Should the Commission
consider the relevance of a Covered Entity's business model in
determining whether to impose any potential capital conditions? For
example, should the Commission take into account the fact that a
Covered Entity does not engage in unsecured lending and other
activities more typical of banks?
    The first potential additional capital condition would require a
Covered Entity to maintain an amount of assets that are allowable under
Exchange Act rule 18a-1, after applying applicable haircuts under the
Basel capital standard \35\ that equals or exceeds the Covered Entity's
current liabilities coming due in the next 365 days. The objective of
this condition is to require a Covered Entity to maintain sufficient
liquidity to meet near-term liabilities through a simple computation,
as compared to the net capital computation required by Exchange Act
rule 18a-1. Generally, current liabilities are understood to mean those
liabilities coming due within one year as distinct from long-term
liabilities that mature in more than a year. The potential 365-day
period is designed to align with that distinction between short-term
and long-term liabilities to facilitate compliance with the condition.
Because the condition does not address long-term liabilities, it would
not necessarily leave the Covered Entity in position where each dollar
of unsubordinated liabilities is matched by more than a dollar of
highly liquid assets (as is the case with the net liquid assets test of
Exchange Act rule 18a-1). However, it would provide a pool of highly
liquid assets that can be used by the Covered Entity to avoid a near-
term liquidity strain that could imperil its ability to remain a going
concern.\36\ The

condition's use of the Basel capital standard haircuts (as opposed to
Exchange Act rule 18a-1 haircuts) is designed to tailor the condition
to the Basel capital standard consistent with substituted compliance.
---------------------------------------------------------------------------

    \35\ See standard supervisory haircuts under the Basel capital
standards. BCBS, The Basel Framework, available at: https://www.bis.org/basel_framework/.
    \36\ See Exchange Act Release No. 86175 (Jun. 21, 2019), 84 FR
43872, 43881 (Aug. 22, 2019) (``The Commission believes that the
broker-dealer capital standard is the most appropriate alternative
for nonbank SBSDs, given the nature of their business activities and
the Commission's experience administering the standard with respect
to broker-dealers. The objective of the broker-dealer capital
standard is to protect customers and counterparties and to mitigate
the consequences of a firm's failure by promoting the ability of
these entities to absorb financial shocks and, if necessary, to
self-liquidate in an orderly manner.'').
---------------------------------------------------------------------------

    The second potential additional capital condition would require
that a Covered Entity make a quarterly record listing: (1) The assets
maintained pursuant to the first potential additional capital
condition, their value, and the amount of their applicable haircuts;
and (2) the aggregate amount of the liabilities coming due in the next
365 days. The requirement to create this record would enable the
Commission or Commission staff to monitor compliance with the potential
condition and facilitate examination of the Covered Entity with regard
to substituted compliance. The quarterly interval between making this
record (as opposed to a daily, weekly, or monthly interval) is designed
to facilitate exams while minimizing the burden of the condition.
Should the Commission require a shorter interval such as daily, weekly,
or monthly or a longer one such as semi-annually or annually? Please
explain.
    In considering these two potential conditions, the Commission
recognizes that the LCR requires Covered Entities to maintain an amount
of high quality liquid assets equal to or greater than their projected
total net cash outflows over a prospective 30 calendar-day period. As
discussed above, the first potential additional condition requires
sufficient liquidity to address liabilities coming due over the next
365 days. The longer period in the condition is designed to cover a
greater amount of liabilities in order to further enhance the Covered
Entity's liquidity to achieve an outcome more in line with the
liquidity that results from the net liquid assets test of Exchange Act
rule 18a-1. The Commission requests comment on how these conditions
would compare to the LCR.
    The Commission requests comment and supporting data on the
potential first two capital conditions. Is the term ``current
liabilities'' understood by market participants? If not, please explain
why and suggest alternative language. Is 365 days an appropriate number
of days to use in connection with covering ``current liabilities''? If
not, please explain why and suggest an alternative number of days. For
example, would a period of 60, 90, 120, 150, 180, 210, 240, 270, 300,
330, 420, 510 days or some other period of days be more appropriate in
terms of enhancing the liquidity of Covered Entities applying
substituted compliance to Exchange Act rule 18a-1? If so, explain why.
If the Commission determines to use a number of days that is less than
365, should the Commission use a term other than ``current
liabilities'' such as ``short-term liabilities''? If so, explain why.
The Commission requests comment on whether the haircuts under the Basel
capital standard are the appropriate haircuts to apply under the
proposed capital condition. If so, please explain why. Are they
comparable to the haircuts under Exchange Act rule 18a-1? Would it
impose a significant burden on Covered Entities to apply the haircuts
under Exchange Act rule 18a-1 rather than under the Basel capital
standard? If so, please explain why. Please identify any regulatory or
operational issues in connection with these proposed capital
conditions, including with maintaining a quarterly record.
    The third potential additional capital condition is that the
Covered Entity maintain at least $100 million of equity capital
composed of highly liquid assets as defined in the Basel capital
standard. This potential condition is based on the $100 million
tentative net capital requirement of Exchange Act rule 18a-1 for SBS
Entities authorized to use models. The condition would be designed to
ensure that Covered Entities applying substituted compliance with
respect to Exchange Act rule 18a-1 have a minimum level of capital to
absorb financial losses. Further, the LCR defines ``highly liquid
assets'' and the use of that definition is designed to tailor the
condition to the Basel capital standard consistent with the substituted
compliance.
    The Commission requests comment and supporting data on the third
potential additional capital condition. How would this potential
minimum capital amount compare with the amounts of equity capital
currently maintained by Covered Entities that would apply substituted
compliance to Exchange Act rule 18a-1? Should the condition require a
different amount of equity capital? For example, should the amount be
$50, $75, $125, or $150 million or some other amount? If so, explain
why. Are the terms ``highly liquid assets'' and ``equity capital''
understood by market participants? If not, please explain why and
suggest alternative terms.
    The fourth potential additional capital condition is that the
Covered Entity include its most recently filed statement of financial
condition whether audited or unaudited with its initial notice to the
Commission of its intent to rely on substituted compliance. This one-
time obligation would provide the Commission with information about the
assets, liabilities, and capital of Covered Entities applying
substituted compliance with respect to Exchange Act rule 18a-1. The
Commission would use the statement of financial condition and the
periodic audited and unaudited reports Covered Entities will file with
the Commission to monitor the appropriateness of the capital condition
if it is included in the final Order. The Commission expects that most
Covered Entities will file their initial notice of intent to apply
substituted compliance with respect to Exchange Act rule 18a-1 at or
around the time they file their registration applications with the
Commission. Therefore, receipt of the statement of financial condition
at that time would allow the Commission to begin this monitoring
process before Covered Entities begin filing audited and unaudited
reports with the Commission pursuant to Exchange Act rule 18a-7.
    The Commission requests comment on the fourth potential additional
capital condition. Are there other means for the Commission to
efficiently obtain this information? If so, explain how. Is the
information presented in these reports prepared in accordance with the
GAAP that the firm uses to prepare publicly available or available to
be issued general purpose financial statements in its home
jurisdiction?
    The Commission requests comment on the potential benefits and costs
of the potential capital conditions? Would the conditions promote
comparable regulatory outcomes between the capital requirements applied
to Covered Entities in France and capital requirements under Exchange
Act rule 18a-1? If so, explain why. If not, explain why not. The
Commission is mindful that compliance with these capital conditions
would require Covered Entities applying substituted compliance to
Exchange Act rule 18a-1 to supplement their existing capital
calculations and practices, as well as to incur additional time and
cost burdens to implement the potential conditions and integrate them
into existing business operations.\37\ The Commission

requests comment and supporting data on these potential time and cost
burdens, including quantitative information about the amount of the
burdens. The Commission also requests comment on any potential
operational or regulatory issues or burdens associated with adhering to
the potential additional capital conditions.
---------------------------------------------------------------------------

    \37\ Additional time and costs burdens may include employee
costs and time to program software and computer systems to add an
additional capital calculation into an existing system and firm
processes and procedures, as well as ongoing time and expenses to
monitor the calculations on an ongoing basis. Further, additional
time and expense may be incurred with respect to any additional
controls implemented to ensure compliance with the potential
additional capital conditions.
---------------------------------------------------------------------------

    The Commission requests comment on the potential impacts the
capital conditions would have on competition. For example, how would
they impact competition between Covered Entities applying substituted
compliance with respect to Exchange Act rule 18a-1 and SBS Entities
that will comply with Exchange Act rule 18a-1? Would the conditions
eliminate or mitigate potential competitive advantages that Covered
Entities adhering to the Basel capital standard might have over SBS
Entities adhering to the more stringent net liquid assets test standard
of Exchange Act rule 18a-1? Alternatively, would the conditions create
competitive disadvantages for Covered Entities applying substituted
compliance with respect to Exchange Act rule 18a-1 as compared to SBS
Entities complying with Exchange Act rule 18a-1? Please describe and
explain.
    The Commission also requests comment on how the potential
additional capital conditions compare to any existing capital
requirements under the Basel capital standards (e.g., LCR, NSFR). For
example, are there differences in the frequency or nature of
calculations under the Basel capital standards?
    Please identify and describe any potential impacts on the way
Covered Entities currently conduct their business with respect to
implementing the potential additional capital conditions.
    The Commission further requests comment on whether the Commission
should consider other potential conditions with respect to applying
substituted compliance to Exchange Act rule 18a-1. Should the
Commission consider imposing a potential capital condition that is more
consistent with Exchange Act rule 18a-1? Please explain why or why not.
Should the Commission consider a capital condition that includes higher
requirements for a Covered Entity that holds a significant amount of
illiquid assets? For example, if 20%, 30%, 40%, 50%, or some other
percent of the Covered Entity's assets would not be allowable under
Exchange Act rule 18a-1, should the firm be required to hold an amount
of allowable assets to cover liabilities coming due over a longer
period of time than a firm that does not exceed the percent threshold?
If so, explain why and identify the appropriate percent threshold.
Should the Commission consider including a condition prescribing a
percent threshold of non-allowable assets under Exchange Act rule 18a-1
held by the Covered Entity over which substituted compliance with
respect to capital would not be permitted? If so, explain why and
identify the appropriate percent threshold.
    The Commission requests comment on whether the Commission should
consider imposing other potential capital conditions (or no conditions)
if a Covered Entity's business with U.S. persons falls below a certain
notional threshold, such as $8 billion, $20 billion, $50 billion, or
some other threshold. Please explain which threshold may be appropriate
or suggest an alternative.

D. Recordkeeping, Reporting, Notification, and Securities Count

    The Commission received comment asking it to eliminate conditions
requiring a Covered Entity to be subject to and comply with EU or
French requirements that either do not apply to the Covered Entity on
an entity-wide basis or are not supervised by the Covered Entity's home
regulator.\38\ The same commenter suggested as a possible solution that
SBS Entities be permitted to elect to comply directly with U.S. law
instead of EU or French requirements with respect to distinct
requirements of the recordkeeping and reporting rules.
---------------------------------------------------------------------------

    \38\ SIFMA Letter at 2-4.
---------------------------------------------------------------------------

    Would it be appropriate to structure the Commission's substituted
compliance determinations in the Order with respect to the
recordkeeping and reporting rules to provide Covered Entities with
greater flexibility to select which distinct requirements within the
broader recordkeeping, reporting, notification, and securities count
rules for which they want to apply substituted compliance? This
approach of making substituted compliance determinations with respect
to certain distinct requirements within the recordkeeping and reporting
rules is illustrated in the proposed UK Order.\39\
---------------------------------------------------------------------------

    \39\ See paras. (f)(1) through (3) of the Proposed UK Order.
---------------------------------------------------------------------------

    As applied to Exchange Act rules 18a-5 and 18a-6, this approach of
providing greater flexibility would result in substituted compliance
determinations with respect to the different categories of records
these rules require SBS Entities to make, keep current, and/or
preserve. Each requirement with respect to a specific category of
records (e.g., paragraph (a)(2) of Exchange Act rule 18a-5 addressing
ledgers (or other records) reflecting all assets and liabilities,
income and expense and capital accounts) would be viewed in isolation
as a distinct recordkeeping rule. This approach is illustrated in the
Proposed UK Order.\40\ Would permitting Covered Entities to take a more
granular approach to the requirements within these recordkeeping rules
be appropriate for the final French Order? For example, would this
approach make it more difficult for the Commission to get a
comprehensive understanding of the Covered Entity's security-based swap
activities and financial condition? Explain why or why not. Would it be
overly complex for the Covered Entity to administer a firm-wide
recordkeeping system under this approach? Explain why or why not. Would
this approach address commenters' concerns with respect to the proposed
French Order? If so, explain why. If not, explain why not.
---------------------------------------------------------------------------

    \40\ See paras. (f)(1) and (2) of the Proposed UK Order.
---------------------------------------------------------------------------

    The EU cross-border condition was intended to address concerns that
are relevant not only to certain requirements under MiFID and MAR as
noted in the Proposed Order, but also to certain requirements under
MiFIR (and other EU and French requirements adopted pursuant to MiFIR).
Just as is true for certain requirements under MiFID and MAR, EU law
allocates the responsibility for supervising and enforcing certain
MiFIR requirements to authorities of the Member State where a Covered
Entity provides certain services. If the Commission adopts the granular
approach to recordkeeping, reporting, notification and securities count
requirements suggested above, should it expand the EU cross-border
condition described above in Section B to apply to the relevant
requirements under MiFIR? Explain why or why not.
    Commenters suggested that the Commission distinguish between EU and
French laws that are conditions to substituted compliance for non-
prudentially regulated SBS Entities versus prudentially regulated SBS
Entities.\41\ Would this request be addressed if the Commission granted
substituted compliance on a more granular level as described above and
illustrated in the Proposed UK Order? If so, explain why. If not,
explain why not.
---------------------------------------------------------------------------

    \41\ See SIFMA Letter at 8; FBF Letter at 2.
---------------------------------------------------------------------------

    Certain of the Commission's recordkeeping, reporting, and
notification requirements are fully or partially linked to substantive
Exchange Act requirements for which a positive

substituted compliance determination is preliminarily not being made
under the proposed Order. In these cases, should the Commission not
make a positive substituted compliance determination for the fully
linked requirement in the recordkeeping or reporting rules or to the
portion of the requirement that is linked to substantive Exchange Act
requirements? In particular, should the Commission not make a positive
substituted compliance determination for recordkeeping, reporting, or
notification requirements linked to the following Exchange Act rules
for which a positive substituted compliance determination is
preliminarily not being made: (1) Exchange Act rule 10b-10; (2)
Exchange Act rule 15Fh-4; (3) Exchange Act rule 15Fh-5; (4) Exchange
Act rule 15Fh-6; (5) Exchange Act rule 18a-2; (6) Exchange Act rule
18a-4; and (7) Regulation SBSR? This approach is illustrated in the
Proposed UK Order.\42\ Is this approach appropriate for the final
French Order? If not, explain why.
---------------------------------------------------------------------------

    \42\ See paras. (f)(1) through (4) of the Proposed UK Order.
---------------------------------------------------------------------------

    Certain of the requirements in the Commission's recordkeeping,
reporting, and notification rules are linked to substantive Exchange
Act requirements where a positive substituted compliance determination
is being made under the proposed Order. In these cases, should a
positive substituted compliance determination for the linked
requirement in the recordkeeping, reporting, or notification rule be
conditioned on the Covered Entity applying substituted compliance to
the linked substantive Exchange Act requirement? If not, explain why.
Should this be the case regardless of whether the requirement is fully
or partially linked to the substantive Exchange Act requirement? If
not, explain why. In particular, should substituted compliance for
recordkeeping, reporting, and notification requirements linked to the
following Exchange Act rules be conditioned on the SBS Entity applying
substituted compliance to the linked substantive Exchange Act rule: (1)
Exchange Act rule 15Fh-3; (2) Exchange Act rule 15Fi-2; (3) Exchange
Act rule 15Fi-3; (4) Exchange Act rule 15Fi-4; (5) Exchange Act rule
15Fi-5; (6) Exchange Act rule 15Fk-1; (7) Exchange Act rule 18a-1; (8)
Exchange Act rule 18a-3; (8) Exchange Act rule 18a-5; and (9) Exchange
Act rule 18a-7? This approach is illustrated in the Proposed UK
Order.\43\ Is this approach appropriate for the final French Order? If
not, explain why.
---------------------------------------------------------------------------

    \43\ See paras. (f)(1) through (4) of the Proposed UK Order.
---------------------------------------------------------------------------

    While certain recordkeeping and reporting requirements are not
expressly linked to Exchange Act rule 18a-1, they would be important to
the Commission's ability to monitor or examine for compliance with the
capital requirements under this rule. The records also will assist the
firm in monitoring its net capital position and, therefore, in
complying with Exchange rule 18a-1 and its appendices. Should a
positive substituted compliance determination with respect to these
recordkeeping and reporting requirements be subject to the condition
that the Covered Entity applies substituted compliance with respect to
Exchange Act rule 18a-1 and its appendices? If not, explain why. This
approach is illustrated in the Proposed UK Order.\44\ Is this approach
appropriate for the final French Order? If not, explain why.
---------------------------------------------------------------------------

    \44\ See paras. (f)(1) through (5) of the Proposed UK Order.
---------------------------------------------------------------------------

    French credit institutions and finance companies are generally
required to close their financial year on December 31.\45\ Moreover,
the French substituted compliance application does not identify French
laws that are comparable to Exchange Act rule 18a-7(i) (notice of
change of fiscal year end). Consequently, is there a basis and a need
for the Commission to make a positive substituted compliance
determination with respect to the requirements in Exchange Act rule
18a-7(i)? If so, explain why? Should the Commission condition a
positive substituted compliance determination with respect to Exchange
Act rule 18a-7(i) on the Covered Entity simultaneously transmitting to
the Commission a copy of any comparable notice required to be sent by
applicable French law, and including with the transmission the contact
information of an individual who can provide further information about
the matter that is the subject of the notice. If so, explain why. If
not, explain why not.
---------------------------------------------------------------------------

    \45\ See French Monetary and Financial Code article R. 511-6.
---------------------------------------------------------------------------

E. Covered Entity Definition

    As discussed in the Proposed Order, Exchange Act rule 3a71-6
provides that the Commission's assessment of the comparability of the
requirements of the foreign financial regulatory system must account
for the effectiveness of foreign authority's supervisory and
enforcement frameworks.\46\ This prerequisite accounts for the
understanding that substituted compliance determinations should reflect
the reality of the foreign regulatory framework, in that rules that
appear high-quality on paper nonetheless should not form the basis for
substituted compliance if--in practice--market participants are
permitted to fall short of their regulatory obligations.
---------------------------------------------------------------------------

    \46\ See French Substituted Compliance Notice and Proposed
Order, 85 FR at 85721 (citing Exchange Act rule 3a71-6(a)(2)(i)).
---------------------------------------------------------------------------

    The French Authorities' Application provided information about the
AMF's and ACPR's supervisory framework. With respect to the AMF's
supervision, the information related to Tier 1 firms. The Commission is
therefore considering revising the definition of Covered Entity to be
limited to credit institutions and investment firms that are supervised
by the AMF under the Tier 1 framework through the single supervisory
mechanism.
    Commenters are invited to address whether the change in the
definition of Covered Entity is appropriate. Would the change result in
the exclusion of any entities likely to register as SBS Entities in
France from reliance on the substituted compliance order?

F. Internal Supervision and Compliance

    Finally, the Commission is considering revising paragraph (d)(3) to
the proposal, which sets forth conditions to substituted compliance in
connection with internal supervision and compliance. Under the
potential revision, substituted compliance for internal supervision and
compliance would encompass two additional sets of prerequisites (in
addition to the other provisions identified in proposed paragraph
(d)(3)): CRR articles 286-88 and 293, which address counterparty credit
risk and risk management generally; and EMIR Margin RTS article 2,
which addresses collateral-related risk management procedures. Those
provisions, which also are incorporated within the proposed
prerequisites to substituted compliance for internal risk management
(proposed paragraph (b)(1)), promote analogous compliance goals as the
other requirements identified within proposed paragraph (d)(3).\47\
Commenters are invited to address the appropriateness of this potential
revision, particularly with regard to the goal of promoting regulatory
outcomes that are comparable to those associated with the internal
supervision and compliance requirements under the Exchange Act.
---------------------------------------------------------------------------

    \47\ The Proposed UK Order similarly encompasses those
provisions as part of the proposed prerequisites to substituted
compliance for internal supervision and compliance requirements.

---------------------------------------------------------------------------

    All comments received to date on the Proposed Order will be
---------------------------------------------------------------------------
considered and need not be resubmitted.

    By the Commission.

    Dated: April 5, 2021.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2021-07254 Filed 4-7-21; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 79, Number 54 (Thursday, March 20, 2014)]
[Notices]
[Pages 15599-15602]
[FR Doc No: 2014-06100]

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DEPARTMENT OF HOMELAND SECURITY

Federal Emergency Management Agency

[Docket ID FEMA-2014-0002]

Changes in Flood Hazard Determinations

AGENCY: Federal Emergency Management Agency, DHS.

ACTION: Final notice.

-----------------------------------------------------------------------

SUMMARY: New or modified Base (1% annual-chance) Flood Elevations
(BFEs), base flood depths, Special Flood Hazard Area (SFHA) boundaries
or zone designations, and/or regulatory floodways (hereinafter referred
to as flood hazard determinations) as shown on the indicated Letter of
Map Revision (LOMR) for each of the communities listed in the table
below are finalized. Each LOMR revises the Flood Insurance Rate Maps
(FIRMs), and in some cases the Flood Insurance Study (FIS) reports,
currently in effect for the listed communities. The flood hazard
determinations modified by each LOMR will be used to calculate flood
insurance premium rates for new buildings and their contents.

DATES: The effective date for each LOMR is indicated in the table
below.

ADDRESSES: Each LOMR is available for inspection at both the respective
Community Map Repository address listed in the table below and online
through the FEMA Map Service Center at www.msc.fema.gov.

FOR FURTHER INFORMATION CONTACT: Luis Rodriguez, Chief, Engineering
Management Branch, Federal Insurance and Mitigation Administration,
FEMA, 500 C Street SW., Washington, DC 20472,<PHONE_NUMBER>, or
(email<EMAIL_ADDRESS>or visit the FEMA Map Information
eXchange (FMIX) online at www.floodmaps.fema.gov/fhm/fmx_main.html.

SUPPLEMENTARY INFORMATION: The Federal Emergency Management Agency
(FEMA) makes the final flood hazard determinations as shown in the
LOMRs for each community listed in the table below. Notice of these
modified flood hazard determinations has been published in newspapers
of local circulation and ninety (90) days have elapsed since that
publication. The Deputy Associate Administrator for Mitigation has
resolved any appeals resulting from this notification.
    The modified flood hazard determinations are made pursuant to
section 206 of the Flood Disaster Protection Act of 1973, 42 U.S.C.
4105, and are in accordance with the National Flood Insurance Act of
1968, 42 U.S.C. 4001 et seq., and with 44 CFR part 65.
    For rating purposes, the currently effective community number is
shown and must be used for all new policies and renewals.
    The new or modified flood hazard information is the basis for the
floodplain management measures that the community is required either to
adopt or to show evidence of being already in effect in order to remain
qualified for participation in the National Flood Insurance Program
(NFIP).
    This new or modified flood hazard information, together with the
floodplain management criteria required by 44 CFR 60.3, are the minimum
that are required. They should not be construed to mean that the
community must change any existing ordinances that are more stringent
in their floodplain management requirements. The community may at any
time enact stricter requirements of its own or pursuant to policies
established by other Federal, State, or regional entities.
    This new or modified flood hazard determinations are used to meet
the floodplain management requirements of the NFIP and also are used to
calculate the appropriate flood insurance premium rates for new
buildings, and for the contents in those buildings. The changes in
flood hazard determinations are in accordance with 44 CFR 65.4.
    Interested lessees and owners of real property are encouraged to
review the final flood hazard information available at the address
cited below for each community or online through the FEMA Map Service
Center at www.msc.fema.gov.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                      Location and case    Chief executive officer       Community map                                        Community
         State and county                    No.                 of community              repository       Effective date of  modification      No.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Arizona:

    Maricopa (FEMA Docket No.: B-   City of Peoria (12-   The Honorable Bob          9875 North 85th        March 7, 2014..................       040050
     1362).                          09-3053P).            Barrett, Mayor, City of    Avenue, Peoria, AZ
                                                           Peoria, 9875 North 85th    85345.
                                                           Avenue, Peoria, AZ 85345.
    Maricopa (FEMA Docket No.: B-   City of Phoenix (12-  The Honorable Greg         200 West Washington    March 7, 2014..................       040051
     1362).                          09-3053P).            Stanton, Mayor, City of    Street, 5th Floor,
                                                           Phoenix, 200 West          Phoenix, AZ 85003.
                                                           Washington Street, 5th
                                                           Floor, Phoenix, AZ 85003.
    Maricopa (FEMA Docket No.: B-   City of Goodyear (13- The Honorable Georgia      119 North Litchfield   February 21, 2014..............       040046
     1362).                          09-0919P).            Lord Mayor, City of        Road Goodyear, AZ
                                                           Goodyear, 190 North        85338.
                                                           Litchfield Road,
                                                           Goodyear, AZ 85338.
    Maricopa (FEMA Docket No.: B-   Unincorporated Areas  The Honorable Max Wilson,  Flood Control          February 21, 2014..............       040037
     1362).                          of Maricopa County    Chairman, Maricopa         District of Maricopa
                                     (13-09-0919P).        County Board of            County, 2801 West
                                                           Supervisors, 301 West      Durango Street,
                                                           Jefferson 10th Floor       Phoenix, AZ 85009.
                                                           Phoenix, AZ 85003.
Colorado:
    El Paso (FEMA Docket No.: B-    City of Colorado      The Honorable Steve Bach   30 South Nevada        January 17, 2014...............       080060
     1362).                          Springs (13-08-       Mayor, City of Colorado    Avenue, Colorado
                                     0369P).               Springs, 30 South Nevada   Springs, CO 80903.
                                                           Avenue, Colorado
                                                           Springs, CO 80903.
    El Paso (FEMA Docket No.: B-    Unincorporated areas  The Honorable Dennis       Regional Building      January 17, 2014...............       080059
     1362).                          of El Paso County     Hisey, Chairperson,        Department, 101 West
                                     (13-08-0369P).        Board of El Paso County    Costilla Street,
                                                           Commissioners, 200 South   Colorado Springs, CO
                                                           Cascades Avenue, Suite     80903.
                                                           100, Colorado Springs,
                                                           CO 80903.
    El Paso (FEMA Docket No.: B-    City of Manitou       The Honorable Marc A.      City Hall, 606         January 17, 2014...............       080063
     1362).                          Springs (13-08-       Snyder, Mayor, City of     Manitou Avenue,
                                     0369P).               Manitou Springs, 606       Manitou Springs,
                                                           Manitou Avenue, Manitou    Colorado, 80829.
                                                           Springs, CO 80829.
Idaho:
    Bannock (FEMA Docket No.: B-    Unincorporated Areas  The Honorable Karl E.      Bannock County Office  December 13, 2013..............       160009
     1362).                          of Bannock County     Anderson, Chairman,        of Planning and
                                     (13-10-0060P).        Bannock County             Development, 130
                                                           Commissioners, 624 East    North 6th Avenue,
                                                           Center Street,             Suite C, Pocatello,
                                                           Pocatello, ID 83201.       ID 83201.
    Bannock (FEMA Docket No.: B-    City of Pocatello     The Honorable Brian S.     911 North 7th Avenue,  December 13, 2013..............       160012
     1362).                          (13-10-0060P).        Blad, Mayor, City of       Pocatello, ID 83201.
                                                           Pocatello, 911 North 7th
                                                           Avenue, Pocatello, ID
                                                           83201.
    Custer (FEMA Docket No.: B-     Unincorporated Areas  The Honorable Wayne        County Courthouse,     January 17, 2014...............       160211
     1362).                          of Custer County      Butts, Chairman, Custer    801 East Main
                                     (13-10-0157P).        County Board of            Street, Challis, ID
                                                           Commissioners, Post        83226.
                                                           Office Box 385, Challis,
                                                           ID 83226.
    Ada (FEMA Docket No.: B-1362).  City of Meridian (13- The Honorable Dave Case,   Public Works           February 18, 2014..............       160180
                                     10-1349P).            Chairman, Ada County,      Department, 33 East
                                                           Board of Commissioners,    Broadway Avenue,
                                                           200 West Front Street,     Meridian, ID 83642.
                                                           Boise, ID 83702.
    Ada (FEMA Docket No.: B-1362).  Unincorporated Areas  The Honorable Tammy de     Public Works           February 18, 2014..............       160001
                                     of Ada County (13-    Weerd, Mayor, City of      Department, 33 East
                                     10-1349P).            Meridian, 33 East          Broadway Avenue,
                                                           Broadway Avenue, Suite     Meridian, ID 83642.
                                                           300, Meridian, ID 83642.
Indiana: LaGrange (FEMA Docket      Unincorporated Areas  The Honorable Jac Price,   114 West Michigan      November 21, 2013..............       180125
 No.: B-1362).                       (13-05-7473P).        President, LaGrange        Street, LaGrange, IN
                                                           County Board of            46761.
                                                           Commissioners, LaGrange
                                                           County Annex Building,
                                                           114 West Michigan
                                                           Street, LaGrange, IN
                                                           46761.
Illinois: Kane (FEMA Docket No.: B- Unincorporated Areas  The Honorable Chris        Kane County            January 8, 2014................       170896
 1362).                              of Kane County (13-   Lauzen, Kane County        Government Center,
                                     05-6235P).            Board Chairman, 719        Building A, Water
                                                           Batavia Avenue, Building   Resources
                                                           A, Geneva, IL 60134.       Department, 719
                                                                                Batavia Avenue,
                                                                                Geneva, IL 60134.
Iowa: Black Hawk (FEMA Docket No.:  City of Cedar Falls   The Honorable Jon Crews,   220 Clay Street,       November 18, 2013..............       190017
 B-1362).                            (13-07-1063P).        Mayor, City of Cedar       Cedar Falls, IA
                                                           Falls, 220 Clay Street,    50613.
                                                           Cedar Falls, IA 50613.
Kansas: Johnson (FEMA Docket No.:   City of Overland      The Honorable Carl         8500 Santa Fe Drive,   March 5, 2014..................       200174
 B-1362).                            Park (13-07-1416P).   Gerlach, Mayor, City of    Overland Park, KS
                                                           Overland Park, 8500        66212.
                                                           Santa Fe Drive, Overland
                                                           Park, KS 66212.
Massachusetts: Hampden (FEMA        City of Holyoke (13-  The Honorable Alex B.      City Hall 536 Dwight   December 19, 2013..............       250142
 Docket No.: B-1362).                01-2049P).            Morse, Mayor, City of      Street, Holyoke, MA
                                                           Holyoke, 536 Dwight        01040.
                                                           Street, Holyoke, MA
                                                           01040.
Michigan:
    Wayne (FEMA Docket No.: B-      Township of Canton    Mr. Phil LaJoy, Town of    1150 South Canton      January 13, 2014...............       260219
     1362).                          (13-05-6153P).        Canton Supervisor, 1150    Center Road, Canton,
                                                           South Canton Center        MI 48188.
                                                           Road, Canton, MI 48188.
    Midland (FEMA Docket No.: B-    City of Midland       The Honorable Maureen      333 West Ellsworth     February 4, 2014...............       260140
     1362).                          Fields (13-05-        Donker, Mayor, City of     Street, Midland, MI
                                     3953P).               Midland Fields, 333 West   48640.
                                                           Ellsworth Street,
                                                           Midland, MI 48640.
    Oakland (FEMA Docket No.: B-    City of Troy (13-05-  The Honorable Dan Slater,  500 West Big Beaver    January 28, 2014...............       260180
     1362).                          4457P).               Mayor, City of Troy, 500   Road, Troy, MI 48084.
                                                           West Big Beaver Road,
                                                           Troy, MI 48084.
Missouri:
    Franklin (FEMA Docket No.: B-   City of Sullivan (13- The Honorable Thomas       209 West Washington    January 9, 2014................       290136
     1362).                          07-0553P).            Leasor, Mayor, City of     Street, Sullivan, MO
                                                           Sullivan, 210 West         63080.
                                                           Washington Street,
                                                           Sullivan, MO 63080.

    Franklin (FEMA Docket No.: B-   City of Sullivan (13- The Honorable John         8 North Church         January 9, 2014................       290493
     1362).                          07-0553P).            Griesheimer, Presiding     Street, Suite B,
                                                           Commissioner, Franklin     Union, MO 63084.
                                                           County Commission, 400
                                                           East Locust Street,
                                                           Suite 206, Union, MO
                                                           63084.
    St. Louis (FEMA Docket No.: B-  City of Chesterfield  The Honorable Bob Nation,  690 Chesterfield       December 17, 2013..............       290896
     1362).                          (13-07-1008P).        Mayor, City of             Parkway West,
                                                           Chesterfield, 690          Chesterfield, MO
                                                           Chesterfield Parkway       63017.
                                                           West, Chesterfield, MO
                                                           63017.
    Lincoln (FEMA Docket No.: B-    City of Moscow Mills  The Honorable Andrew       P.O. Box 36, Moscow    January 30, 2014...............       290546
     1362).                          (13-07-1368P).        Teschendorf, Mayor, City   Mills, MO 63362.
                                                           of Moscow Mills, P.O.
                                                           Box 36, Moscow Mills, MO
                                                           63362.
    Lincoln (FEMA Docket No.: B-    Unincorporated Areas  Mr. Dan Colbert,           250 West Collage,      January 30, 2014...............       290869
     1362).                          of Lincoln County     Presiding Commissioner,    Troy, MO 63379.
                                     (13-07-1368P).        Lincoln County, 201 Main
                                                           Street, Troy, MO 63379.
    Lincoln (FEMA Docket No.: B-    City of Troy (13-07-  The Honorable March        800 Cap-Au-Gris        January 30, 2014...............       290641
     1362).                          1363P).               Cross, Mayor, City of      Street, Troy, MO
                                                           Troy, 800 Cap-Au-Gris      63379.
                                                           Street, Troy, MO 63379.
    Lincoln (FEMA Docket No.: B-    Unincorporated Areas  Mr. Dan Colbert,           250 West Collage,      January 30, 2014...............       290869
     1362).                          of Lincoln County     Presiding Commissioner,    Troy, MO 63379.
                                     (13-07-1363P).        Lincoln County, 201 Main
                                                           Street, Troy, MO 63379.
Minnesota:
    Dakota (FEMA Docket No.: B-     City of Lakeville     The Honorable Matt          20195 Holyoke         February 14, 2014..............       270107
     1362).                          (13-05-7174).         Little, Mayor, City of     Avenue, Lakeville,
                                                           Lakeville, 20195 Holyoke   MN 55044.
                                                           Avenue, Lakeville, MN
                                                           55044.
Nebraska:
    Saunders (FEMA Docket No.: B-   Unincorporated Areas  The Honorable Doris        433 North Chestnut     February 14, 2014..............       310195
     1362).                          of Saunders County    Karloff, Chair, Saunders   Street, Wahoo, NE
                                     (12-07-3332P).        County Board, 433 North    68066.
                                                           Chestnut Street, Wahoo,
                                                           NE 68066.
    Saunders......................  City of Wahoo (12-07- The Honorable Janet A.     605 North Broadway,    February 14, 2014..............       310204
    (FEMA Docket No.: B-1362).....   3332P).               Jonas, Mayor, City of      Wahoo, NE 68066.
                                                           Wahoo, 605 North
                                                           Broadway, Wahoo, NE
                                                           68066.
Ohio:
    Stark (FEMA Docket No.: B-      City of Louisville    The Honorable Patricia A.  215 South Mill         March 13, 2014.................       390516
     1362).                          (13-05-2237P).        Fallot, Mayor, City of     Street, Louisville,
                                                           Louisville, 215 South      OH 44641.
                                                           Mill Street, Louisville,
                                                           OH 44641.
    Greene (FEMA Docket No.: B-     City of Beavercreek   The Honorable Vicki        1368 Research Park     January 16, 2014...............       390876
     1362).                          (13-05-4635P).        Giambrone, Mayor, City     Drive, Beavercreek,
                                                           of Beavercreek, 1368       OH 45432.
                                                           Research Park Drive,
                                                           Beavercreek, OH 45432.
    Cuyahoga (FEMA Docket No.: B-   City of Middelburg    The Honorable Garry W.     15700 Bagley Road,     February 20, 2014..............       390117
     1362).                          Heights (13-05-       Starr, Mayor, City of      Middleburg Heights,
                                     5766P).               Middleburg Heights,        OH 44130.
                                                           15700 Bagley Road,
                                                           Middleburg Heights, OH
                                                           44130.
Oregon:
     Jackson (FEMA Docket No.: B-   City Medford (13-10-  The Gary Wheeler, Mayor,   411 West 8th Street,   February 11, 2014..............       410096
     1362).                          0459P).               City of Medford, 411       Medford, OR 97501.
                                                           West 8th Street,
                                                           Medford, OR 97501.
    Benton (FEMA Docket No.: B-     Unincorporated Areas  The Honorable Annabelle    408 Southwest Monroe   November 29, 2013..............       410008
     1362).                          of Benton County      Jaramillo, Chair, Benton   Avenue, Suite 111,
                                     (13-10-0260P).        County Board of            Corvallis, OR 97333.
                                                           Commissioners, 205
                                                           Northwest 5th Street,
                                                           Corvallis, OR 97333.
    Benton (FEMA Docket No.: B-     Unincorporated Areas  The Honorable Rocky        City Hall, 980         November 29, 2013..............       410011
     1362).                          Of Benton County,     Sloan, Mayor, City of      Applegate Street,
                                     (13-10-0260P).        Philomath, 980 Applegate   Philomath, OR 97370.
                                                           Street, Philomath, OR
                                                           97370.
Washington: Pierce (FEMA Docket     City of Puyallup (13- The Honorable Rick         333 South Meridian,    November 20, 2013..............       530144
 No.: B-1362).                       10-0154P).            Hansen, Mayor, City of     Puyallup, WA 98371.
                                                           Puyallup, 333 South
                                                           Meridian, Puyallup, WA
                                                           98371.
Wisconsin:
    Waukesha (FEMA Docket No.: B-   Unincorporated Areas  Mr. Dan Vrakas, Waukesha   515 West Moreland      January 7, 2014................       550476
     1362).                          of Waukesha County,   County Executive, 515      Boulevard, Room 230,
                                     (13-05-1048P).        West Moreland Boulevard,   Waukesha, WI 53188.
                                                           Room 320, Waukesha, WI
                                                           53188.
    Brown (FEMA Docket No.: B-      Village of Bellevue   The Honorable Craig Beyl,  2828 Allouez Avenue,   February 6, 2014...............       550627
     1362).                          (13-05-5752P).        Village President,         Bellevue. WI 54311.
                                                           Village of Bellevue,
                                                           2828 Allouez Avenue,
                                                           Bellevue. WI 54311.
--------------------------------------------------------------------------------------------------------------------------------------------------------

(Catalog of Federal Domestic Assistance No. 97.022, ``Flood
Insurance.'')

    Dated: March 7, 2014.
Roy E. Wright,
Deputy Associate Administrator for Mitigation, Department of Homeland
Security, Federal Emergency Management Agency.
[FR Doc. 2014-06100 Filed 3-19-14; 8:45 am]
BILLING CODE 9110-12-P