240.18a-4, as applicable, and reported in Part II or IIA of Form X-17A-
5 (Sec.  249.617 of this chapter);
    (xv) Detail of all items, not otherwise substantiated, which are
charged or credited in the Computation of Net Capital pursuant to Sec.
240.15c3-1 or Sec.  240.18a-1, as applicable, such as cash margin
deficiencies, deductions related to securities values and undue
concentration, aged securities differences, and insurance claims
receivable;
    (xvi) Detail relating to the calculation of the risk margin amount
pursuant to Sec.  240.15c3-1(c)(17) or Sec.  240.18a-1(c)(6), as
applicable; and
    (xvii) Other schedules which are specifically prescribed by the
Commission as necessary to support information reported as required by
Sec. Sec.  240.17a-5, 240.17a-12, and 240.18a-7, as applicable.

    (9) The records required to be made pursuant to Sec.  240.15c3-
3(d)(5) and (o) or Sec.  240.18a-4, as applicable.
* * * * *
    (12) The records required to be made pursuant to Sec.  240.15c3-
1e(c)(4)(vi) or Sec.  240.18a-1(e)(2)(iii)(F)(2), as applicable.
    (13) The written policies and procedures the broker-dealer
establishes, documents, maintains, and enforces to assess
creditworthiness for the purpose of Sec.  240.15c3-1(c)(2)(vi)(E),
(c)(2)(vi)(F)(1) and (2), and (c)(2)(vi)(H) or Sec.  240.18a-
1(c)(1)(vi)(2), as applicable.
    (14) A copy of information required to be reported under Sec. Sec.
242.901 through 242.909 of this chapter (Regulation SBSR).
    (15) Copies of documents, communications, disclosures, and notices
related to business conduct standards as required under Sec. Sec.
240.15Fh-1 through 240.15Fh-6 and 240.15Fk-1.
    (16) Copies of documents used to make a reasonable determination
with respect to special entities, including information relating to the
financial status, the tax status, the investment or financing
objectives of the special entity as required under section 15F(h)(4)(C)
and (5)(A) of the Act (15 U.S.C. 78o-10(h)(4)(C) and (5)(A)).
    (c) Every member, broker or dealer subject to Sec.  240.17a-3 must
preserve for a period of not less than six years after the closing of
any customer's account any account cards or records which relate to the
terms and conditions with respect to the opening and maintenance of the
account.
    (d) Every member, broker or dealer subject to Sec.  240.17a-3 must
preserve during the life of the enterprise and of any successor
enterprise all partnership articles or, in the case of a corporation,
all articles of incorporation or charter, minute books, and stock
certificate books (or, in the case of any other form of legal entity,
all records such as articles of organization or formation, and minute
books used for a purpose similar to those records required for
corporations or partnerships), all Forms BD (Sec.  249.501 of this
chapter), all Forms BDW (Sec.  249.501a of this chapter), all Forms
SBSE-BD (Sec.  249.1600b of this chapter), all Forms SBSE-C (Sec.
249.1600c of this chapter), all Forms SBSE-W (Sec.  249.1601 of this
chapter), all amendments to these forms, and all licenses or other
documentation showing the registration of the member, broker or dealer
with any securities regulatory authority or the Commodity Futures
Trading Commission.
    (e) Every member, broker or dealer subject to Sec.  240.17a-3 must
maintain and preserve in an easily accessible place:
    (1) All records required under Sec.  240.17a-3(a)(12) until at
least three years after the associated person's employment and any
other connection with the member, broker or dealer has terminated.
    (2) All records required under Sec.  240.17a-3(a)(13) until at
least three years after the termination of employment or association of
those persons required by Sec.  240.17f-2 to be fingerprinted.
    (3) All records required pursuant to Sec.  240.17a-3(a)(15) during
the life of the enterprise.
    (4) All records required pursuant to Sec.  240.17a-3(a)(14) for
three years.
* * * * *
    (6) Each report which a securities regulatory authority or the
Commodity Futures Trading Commission has requested or required the
member, broker or dealer to make and furnish to it pursuant to an order
or settlement, and each securities regulatory authority, Commodity
Futures Trading Commission, or prudential regulator examination report
until three years after the date of the report.
* * * * *
    (f) * * *
    (3) * * *
    (vii) For every member, broker or dealer exclusively using
electronic storage media for some or all of its record preservation
under this section, at least one third party (the undersigned), who has
access to and the ability to download information from the member's,
broker's or dealer's electronic storage media to any acceptable medium
under this section, must file with the designated examining authority
for the member, broker or dealer the following undertakings with
respect to such records:

    The undersigned hereby undertakes to furnish promptly to the
U.S. Securities and Exchange Commission (``Commission''), its
designees or representatives, any self-regulatory organization of
which it is a member, or any State securities regulator having
jurisdiction over the member, broker or dealer, upon reasonable
request, such information as deemed necessary by the staffs of the
Commission, any self-regulatory organization of which it is a
member, or any State securities regulator having jurisdiction over
the member, broker or dealer to download information kept on the
member's, broker's or dealer's electronic storage media to any
medium acceptable under Sec.  240.17a-4. Furthermore, the
undersigned hereby undertakes to take reasonable steps to provide
access to information contained on the member's, broker's or
dealer's electronic storage media, including, as appropriate,
arrangements for the downloading of any record required to be
maintained and preserved by the member, broker or dealer pursuant to
Sec. Sec.  240.17a-3 and 240.17a-4 in a format acceptable to the
staffs of the Commission, any self-regulatory organization of which
it is a member, or any State securities regulator having
jurisdiction over the member, broker or dealer. Such arrangements
will provide specifically that in the event of a failure on the part
of a member, broker or dealer to download the record into a readable
format and after reasonable notice to the broker or dealer, upon
being provided with the appropriate electronic storage medium, the
undersigned will undertake to do so, as the staffs of the
Commission, any self-regulatory organization of which it is a
member, or any State securities regulator having jurisdiction over
the member, broker or dealer may request.

    (g) If a person who has been subject to Sec.  240.17a-3 ceases to
transact a business in securities directly with others than members of
a national securities exchange, or ceases to transact a business in
securities through the medium of a member of a national securities
exchange, or ceases to be registered pursuant to section 15 of the Act
(15 U.S.C. 78o) such person must, for the remainder of the periods of
time specified in this section, continue to preserve the records which
it theretofore preserved pursuant to this section.
* * * * *
    (i)(1) If the records required to be maintained and preserved
pursuant to the provisions of Sec. Sec.  240.17a-3 and 240.17a-4 are
prepared or maintained by an outside service bureau, depository, bank
which does not operate pursuant to Sec.  240.17a-3(b)(2), or other
recordkeeping service on behalf of the member, broker or dealer
required to maintain and preserve such records, such outside entity
must file with the Commission a written undertaking in form acceptable
to the Commission, signed by a duly authorized person, to the effect
that such records are the property of the member, broker or dealer
required to maintain and preserve such records and will be surrendered
promptly on request of the member, broker or dealer and including the
following provision:

    With respect to any books and records maintained or preserved on
behalf of [BD], the undersigned hereby undertakes to permit
examination of such books and records at any time or from time to
time during business hours by representatives or designees of the
Securities and Exchange Commission, and to promptly furnish to said
Commission or its designee true, correct, complete and current hard
copy of any or all or any part of such books and records.

    (2) Agreement with an outside entity will not relieve such member,
broker or dealer from the responsibility to prepare

and maintain records as specified in this section or in Sec.  240.17a-
3.
* * * * *
    (m) * * *
    (1) The term office has the meaning set forth in Sec.  240.17a-
3(g)(1).
    (2) The term principal has the meaning set forth in Sec.  240.17a-
3(g)(2).
    (3) The term securities regulatory authority has the meaning set
forth in Sec.  240.17a-3(g)(3).
    (4) The term associated person has the meaning set forth in Sec.
240.17a-3(g)(4).
    (5) The term business as such includes security-based swap
activity.
* * * * *

0
7. Section 240.17a-5 is amended by:
0
 a. Adding introductory text;
0
 b. Revising paragraph (a) heading and removing paragraph (a)(1);
0
c. Redesignating paragraphs (a)(2) through (7) as paragraphs (a)(1)
through (6);
0
d. Revising newly redesignated paragraphs (a)(1)(ii) through (iv) and
(a)(2) through (5);
0
e. In newly redesignated paragraph (a)(6), removing the word ``shall''
and adding in its place the word ``will'' wherever it appears;
0
f. Revising paragraph (b)(1);
0
g. In paragraphs (b)(3) through (5), removing the word ``shall'' and
adding in its place the word ``will'' wherever it appears;
0
h. In paragraphs (c)(1) and (2), removing the word ``shall'' and adding
in its place the word ``must'' wherever it appears;
0
i. Revising paragraph (c)(3);
0
j. In paragraph (c)(4)(iii), removing the word ``shall'' and adding in
its place the word ``must'';
0
k. Designate the undesignated paragraph following paragraph (c)(4)(iii)
as paragraph (c)(4)(iv);
0
l. In paragraph (c)(5)(iii)(C), removing the word ``Home'' and adding
in its place the word ``home'' wherever it appears;
0
m. In paragraph (d)(1)(i) introductory text, removing ``(d)(1)(iv)''
and adding ``(iv)'' in its place and adding ``(15 U.S.C. 78o)'' after
the phrase ``section 15 of the Act'';
0
n. Revising paragraphs (d)(1)(i)(B), (d)(2)(i) through (iii),
(d)(3)(i)(A)(4) and (5), (d)(3)(i)(B) and (C), (d)(3)(iii), (d)(6),
(e)(1)(ii), and (e)(2) through (4);
0
o. In the fifth sentence of paragraph (f)(3)(v)(B), adding the word
``the'' before the phrase ``independent public accountant does not
agree'';
0
p. Revising the note to paragraph (h);
0
q. In paragraph (k) introductory text, removing the word ``shall'' and
adding in its place the word ``must'' wherever it appears and removing
the phrase ``Market Regulation'' and adding in its place the phrase
``Trading and Markets'';
0
r. In paragraph (l), removing ``(1)'' and ``(2)'', removing the phrase
``Securities Exchange Act of 1934'' and adding in its place the word
``Act'', and removing the word ``shall'' and adding in its place the
word ``must'';
0
s. In paragraph (m)(1), removing the word ``shall'' and adding in its
place the word ``must'';
0
t. In paragraph (m)(2), removing ``(48 Stat. 882; 15 U.S.C. 78c)'' and
``(78 Stat. 565; 15 U.S.C. 78c)'' and adding in their place ``(15
U.S.C. 78c)'';
0
u. In paragraph (m)(4), removing the word ``shall'' and adding in its
place the word ``will'';
0
v. In paragraph (n)(2), removing the word ``shall'' and adding in its
place the word ``must'';
0
and
0
w. Revising paragraph (o).
    The additions and revisions read as follows:

Sec.  240.17a-5   Reports to be made by certain brokers and dealers.

    This section applies to the following types of entities: Except as
provided in this introductory text, a broker or dealer, including an
OTC derivatives dealer as that term is defined in Sec.  240.3b-12
registered pursuant to section 15 of the Act (15 U.S.C. 78o); a broker
or dealer, other than an OTC derivatives dealer, registered pursuant to
section 15 of the Act that is also a security-based swap dealer
registered pursuant to section 15F of the Act (15 U.S.C. 78o-10); and a
broker or dealer, including an OTC derivatives dealer, registered
pursuant to section 15 of the Act that is also a major-security-based
swap participant registered pursuant to section 15F of the Act. Section
240.18a-7 (rather than this section) applies to the following types of
entities: A security-based swap dealer registered pursuant to section
15F of the Act that is not also a broker or dealer, other than an OTC
derivatives dealer, registered pursuant to section 15 of the Act; a
security-based swap dealer registered pursuant to section 15F of the
Act that is also an OTC derivatives dealer; and a major security-based
swap participant registered pursuant to section 15F of the Act that is
not also a broker or dealer, including an OTC derivatives dealer,
registered pursuant to section 15 of the Act.
    (a) Monthly and quarterly reports--(1) * * *
    (ii) Every broker or dealer subject to this paragraph (a) who
clears transactions or carries customer accounts and every broker or
dealer that is registered as a security-based swap dealer or major
security-based swap participant under section 15F of the Act (15 U.S.C.
78o-10) must file with the Commission an executed Part II of Form X-
17A-5 (Sec.  249.617 of this chapter) within 17 business days after the
end of the calendar quarter and within 17 business days after the end
of the fiscal year of the broker or dealer where that date is not the
end of a calendar quarter. Certain of such brokers or dealers must file
with the Commission an executed Part IIA in lieu thereof if the nature
of their business is limited as described in the instructions to Part
II of Form X-17A-5 (Sec.  249.617 of this chapter).
    (iii) Every broker or dealer that neither clears transactions nor
carries customer accounts and that is not registered as a security-
based swap dealer or major security-based swap participant under
section 15F of the Act (15 U.S.C. 78o-10) must file with the Commission
an executed Part IIA of Form X-17A-5 (Sec.  249.617 of this chapter)
within 17 business days after the end of each calendar quarter and
within 17 business days after the end of the fiscal year of the broker
or dealer where that date is not the end of a calendar quarter.
    (iv) Upon receiving written notice from the Commission or the
examining authority designated pursuant to section 17(d) of the Act (15
U.S.C. 78q(d)) (``designated examining authority''), a broker or dealer
who receives such notice must file with the Commission on a monthly
basis, or at such times as will be specified, an executed Part II or
Part IIA of Form X-17A-5 (Sec.  249.617 of this chapter), and such
other financial or operational information as will be required by the
Commission or the designated examining authority.
    (2) The reports provided for in this paragraph (a) that must be
filed with the Commission will be considered filed when received at the
Commission's principal office in Washington, DC, and the regional
office of the Commission for the region in which the broker or dealer
has its principal place of business. All reports filed pursuant to this
paragraph (a) will be deemed to be confidential.
    (3) The provisions of paragraph (a)(1) of this section will not
apply to a member of a national securities exchange or a registered
national securities association if said exchange or association
maintains records containing the information required by Part I, Part
II, or Part IIA of Form X-17A-5 (Sec.  249.617 of this chapter), as to
such member, and transmits to the Commission a copy of the applicable
parts of Form X-17A-5 (Sec.  249.617 of this chapter) as to such
member,

pursuant to a plan, the procedures and provisions of which have been
submitted to and declared effective by the Commission. Any such plan
filed by a national securities exchange or a registered national
securities association may provide that when a member is also a member
of one or more national securities exchanges, or of one or more
national securities exchanges and a registered national securities
association, the information required to be submitted with respect to
any such member may be submitted by only one specified national
securities exchange or registered national securities association. For
the purposes of this section, a plan filed with the Commission by a
national securities exchange or a registered national securities
association will not become effective unless the Commission, having due
regard for the fulfillment of the Commission's duties and
responsibilities under the provisions of the Act, declares the plan to
be effective. Further, the Commission, in declaring any such plan
effective, may impose such terms and conditions relating to the
provisions of the plan and the period of its effectiveness as may be
deemed necessary or appropriate in the public interest, for the
protection of investors, or to carry out the Commission's duties and
responsibilities under the Act.
    (4) Every broker or dealer subject to this paragraph (a) must file
Form Custody (Sec.  249.639 of this chapter) with its designated
examining authority within 17 business days after the end of each
calendar quarter and within 17 business days after the end of the
fiscal year of the broker or dealer where that date is not the end of a
calendar quarter. The designated examining authority must maintain the
information obtained through the filing of Form Custody and must
promptly transmit that information to the Commission at such time as it
transmits the applicable part of Form X-17A-5 (Sec.  249.617 of this
chapter) as required in paragraph (a)(2) of this section.
    (5) Broker-dealers that have been authorized by the Commission to
compute net capital pursuant to Sec.  240.15c3-1e must file the
following additional reports with the Commission:
    (i) For each product for which the broker or dealer calculates a
deduction for market risk other than in accordance with Sec.  240.15c3-
1e(b)(1) or (3), the product category and the amount of the deduction
for market risk within 17 business days after the end of the month;
    (ii) A graph reflecting, for each business line, the daily intra-
month value at risk within 17 business days after the end of the month;
    (iii) The aggregate value at risk for the broker or dealer within
17 business days after the end of the month;
    (iv) For each product for which the broker or dealer uses scenario
analysis, the product category and the deduction for market risk within
17 business days after the end of the month;
    (v) Credit risk information on derivatives exposures within 17
business days after the end of the month, including:
    (A) Overall current exposure;
    (B) Current exposure (including commitments) listed by counterparty
for the 15 largest exposures;
    (C) The ten largest commitments listed by counterparty;
    (D) The broker's or dealer's maximum potential exposure listed by
counterparty for the 15 largest exposures;
    (E) The broker's or dealer's aggregate maximum potential exposure;
    (F) A summary report reflecting the broker's or dealer's current
and maximum potential exposures by credit rating category; and
    (G) A summary report reflecting the broker's or dealer's current
exposure for each of the top ten countries to which the broker or
dealer is exposed (by residence of the main operating group of the
counterparty);
    (vi) Regular risk reports supplied to the broker's or dealer's
senior management in the format described in the application, within 17
business days after the end of the month;
    (vii) [Reserved]
    (viii) A report identifying the number of business days for which
the actual daily net trading loss exceeded the corresponding daily VaR
within 17 business days after the end of each calendar quarter; and
    (ix) The results of backtesting of all internal models used to
compute allowable capital, including VaR and credit risk models,
indicating the number of backtesting exceptions within 17 business days
after the end of the calendar quarter.
* * * * *
    (b) * * *
    (1) If a broker or dealer holding any membership interest in a
national securities exchange or registered national securities
association ceases to be a member in good standing of such exchange or
association, such broker or dealer must, within two business days after
such event, file with the Commission Part II or Part IIA of Form X-17A-
5 (Sec.  249.617 of this chapter) as determined by the standards set
forth in paragraphs (a)(1)(ii) through (iv) of this section as of the
date of such event. The report must be filed at the Commission's
principal office in Washington, DC, and with the regional office of the
Commission for the region in which the broker or dealer has its
principal place of business; provided, however, that such report need
not be made or filed if the Commission, upon written request or upon
its own motion, exempts such broker or dealer, either unconditionally
or on specified terms and conditions, from such requirement; provided,
further, that the Commission may, upon request of the broker or dealer,
grant extensions of time for filing the report specified herein for
good cause shown.
* * * * *
    (c) * * *
    (3) Unaudited statements to be furnished. Unaudited statements
dated 6 months after the date of the audited statements required to be
furnished by paragraphs (c)(1) and (2) of this section must be
furnished within 65 days after the date of the unaudited statements.
The unaudited statements may be furnished 70 days after that time limit
has expired if the broker or dealer sends them with the next mailing of
the broker's or dealer's quarterly customer statements of account. In
that case, the broker or dealer must include a statement in that
mailing of the amount of the broker's or dealer's net capital and its
required net capital in accordance with Sec.  240.15c3-1, as of a
fiscal month end that is within the 75-day period immediately preceding
the date the statements are sent to customers. The unaudited statements
must contain the information specified in paragraphs (c)(2)(i) and (ii)
of this section.
* * * * *
    (d) * * *
    (1)(i) * * *
    (B)(1) If the broker or dealer did not claim it was exempt from
Sec.  240.15c3-3 throughout the most recent fiscal year or the broker
or dealer is subject to Sec.  240.15c3-3(p), a compliance report as
described in paragraph (d)(3) of this section executed by the person
who makes the oath or affirmation under paragraph (e)(2) of this
section; or
    (2) If the broker or dealer did claim it was exempt from Sec.
240.15c3-3 throughout the most recent fiscal year and the broker or
dealer is not subject to Sec.  240.15c3-3(p), an exemption report as
described in paragraph (d)(4) of this section executed by the person
who makes the oath or affirmation under paragraph (e)(2) of this
section;
* * * * *
    (2) * * *

    (i) A Statement of Financial Condition, a Statement of Income, a
Statement of Cash Flows, a Statement of Changes in Stockholders' or
Partners' or Sole Proprietor's Equity, and a Statement of Changes in
Liabilities Subordinated to Claims of General Creditors. The statements
must be prepared in accordance with U.S. generally accepted accounting
principles and must be in a format that is consistent with the
statements contained in Part II or Part IIA of Form X-17A-5 (Sec.
249.617 of this chapter), as applicable. If the Statement of Financial
Condition filed in accordance with instructions to Part II or Part IIA
of Form X-17A-5 (Sec.  249.617 of this chapter), as applicable, is not
consolidated, a summary of financial data, including the assets,
liabilities, and net worth or stockholders' equity, for subsidiaries
not consolidated in the applicable Part II or Part IIA as filed by the
broker or dealer must be included in the notes to the financial
statements reported on by the independent public accountant.
    (ii) Supporting schedules that include, from Part II or Part IIA of
Form X-17A-5 (Sec.  249.617 of this chapter), a Computation of Net
Capital under Sec.  240.15c3-1, a Computation for Determination of
Customer Reserve Requirements under Sec.  240.15c3-3a (Exhibit A of
Sec.  240.15c3-3), a Computation for Determination of PAB Requirements
under Exhibit A of Sec.  240.15c3-3, a Computation for Determination of
Security-Based Swap Customer Reserve Requirements under Sec.  240.15c3-
3b (Exhibit B of Sec.  240.15c3-3), Information Relating to the
Possession or Control Requirements for Customers under Sec.  240.15c3-
3, and Information Relating to the Possession or Control Requirements
for Security-Based Swap Customers under Sec.  240.15c3-3, as
applicable.
    (iii) If any of the Computation of Net Capital under Sec.
240.15c3-1, the Computation for Determination of Customer Reserve
Requirements Under Exhibit A of Sec.  240.15c3-3, or the Computation
for Determination of Security-Based Swap Customer Reserve Requirements
under Exhibit B of Sec.  240.15c3-3, as applicable, in the financial
report is materially different from the corresponding computation in
the most recent Part II or Part IIA of Form X-17A-5 (Sec.  249.617 of
this chapter), as applicable, filed by the broker or dealer pursuant to
paragraph (a) of this section, a reconciliation, including appropriate
explanations, between the computation in the financial report and the
computation in the most recent Part II or Part IIA of Form X-17A-5, as
applicable, filed by the broker or dealer. If no material differences
exist, a statement so indicating must be included in the financial
report.
    (3) * * *
    (i) * * *
    (A) * * *
    (4) The broker or dealer was in compliance with Sec. Sec.
240.15c3-1, 240.15c3-3(e) and, if applicable, 240.15c3-3(p)(3) as of
the end of the most recent fiscal year; and
    (5) The information the broker or dealer used to state whether it
was in compliance with Sec. Sec.  240.15c3-1, 240.15c3-3(e) and, if
applicable, 240.15c3-3(p)(3) was derived from the books and records of
the broker or dealer.
    (B) If applicable, a description of each identified material
weakness in the Internal Control Over Compliance of the broker or
dealer during the most recent fiscal year.
    (C) If applicable, a description of an instance of non-compliance
with Sec.  240.15c3-1, Sec.  240.15c3-3(e), or, if applicable, Sec.
240.15c3-3(p)(3) as of the end of the most recent fiscal year.
* * * * *
    (iii) The broker or dealer is not permitted to conclude that its
Internal Control Over Compliance was effective during the most recent
fiscal year if there were one or more material weaknesses in its
Internal Control Over Compliance during the most recent fiscal year.
The broker or dealer is not permitted to conclude that its Internal
Control Over Compliance was effective as of the end of the most recent
fiscal year if there were one or more material weaknesses in its
internal control as of the end of the most recent fiscal year. A
material weakness is a deficiency, or a combination of deficiencies, in
Internal Control Over Compliance such that there is a reasonable
possibility that non-compliance with Sec.  240.15c3-1, Sec.  240.15c3-
3(e), or Sec.  240.15c3-3(p)(3) will not be prevented or detected on a
timely basis or that non-compliance to a material extent with Sec.
240.15c3-3, except for paragraph (e), Sec.  240.15c3-3(p), except for
paragraph (p)(3), Sec.  240.17a-13, or any Account Statement Rule will
not be prevented or detected on a timely basis. A deficiency in
Internal Control Over Compliance exists when the design or operation of
a control does not allow the management or employees of the broker or
dealer, in the normal course of performing their assigned functions, to
prevent or detect on a timely basis non-compliance with Sec.  240.15c3-
1, Sec.  240.15c3-3, or Sec.  240.17a-13, or any Account Statement
Rule.
* * * * *
    (6) Filing of annual reports. The annual reports must be filed with
the Commission at the regional office of the Commission for the region
in which the broker or dealer has its principal place of business and
to the Commission's principal office in Washington, DC, or the annual
reports may be filed with the Commission electronically in accordance
with directions provided on the Commission's website. The annual
reports must also be filed at the principal office of the designated
examining authority for the broker or dealer and with the Securities
Investor Protection Corporation (``SIPC'') if the broker or dealer is a
member of SIPC. Copies of the reports must be provided to all self-
regulatory organizations of which the broker or dealer is a member,
unless the self-regulatory organization by rule waives the requirement
in this paragraph (d)(6).
* * * * *
    (e) * * *
    (1) * * *
    (ii) A broker or dealer that files an annual report under paragraph
(d) of this section that is not covered by a report prepared by an
independent public accountant must include in the oath or affirmation
required by paragraph (e)(2) of this section a statement of the facts
and circumstances relied upon as a basis for exemption from the
requirement that the annual report filed under paragraph (d) of this
section be covered by reports prepared by an independent public
accountant.
    (2) The broker or dealer must attach to the financial report an
oath or affirmation that, to the best knowledge and belief of the
person making the oath or affirmation:
    (i) The financial report is true and correct; and
    (ii) Neither the broker or dealer, nor any partner, officer,
director, or equivalent person, as the case may be, has any proprietary
interest in any account classified solely as that of a customer. The
oath or affirmation must be made before a person duly authorized to
administer such oaths or affirmations. If the broker or dealer is a
sole proprietorship, the oath or affirmation must be made by the
proprietor; if a partnership, by a general partner; if a corporation,
by a duly authorized officer; or if a limited liability company or
limited liability partnership, by the chief executive officer, chief
financial officer, manager, managing member, or those members vested
with management authority for the limited liability company or limited
liability partnership.
    (3) The annual reports filed under paragraph (d) of this section
are not

confidential, except that, if the Statement of Financial Condition in a
format that is consistent with Part II or Part IIA of Form X-17A-5
(Sec.  249.617 of this chapter) is bound separately from the balance of
the annual reports filed under paragraph (d) of this section, and each
page of the balance of the annual reports is stamped ``confidential,''
then the balance of the annual reports will be deemed confidential to
the extent permitted by law. However, the annual reports, including the
confidential portions, will be available for official use by any
official or employee of the U.S. or any State, by national securities
exchanges and registered national securities associations of which the
broker or dealer filing such a report is a member, by the Public
Company Accounting Oversight Board, and by any other person if the
Commission authorizes disclosure of the annual reports to that person
as being in the public interest. Nothing contained in this paragraph
(e)(3) may be construed to be in derogation of the rules of any
registered national securities association or national securities
exchange that give to customers of a broker or dealer the right, upon
request to the broker or dealer, to obtain information relative to its
financial condition.
    (4) The broker or dealer must file with SIPC a report on the SIPC
annual general assessment reconciliation or exclusion from membership
forms that contains such information and is in such format as
determined by SIPC by rule and approved by the Commission.
* * * * *
    (h) * * *

    Note 1 to paragraph (h):  The attention of the broker or dealer
and the independent public accountant is called to the fact that
under Sec.  240.17a-11(a)(1), among other things, a broker or dealer
whose net capital declines below the minimum required pursuant to
Sec.  240.15c3-1 must give notice of such deficiency that same day
in accordance with Sec.  240.17a-11(h) and the notice must specify
the broker or dealer's net capital requirement and its current
amount of net capital. The attention of the broker or dealer and
accountant also is called to the fact that under Sec.  240.15c3-
3(i), if a broker or dealer fails to make a reserve bank account or
special reserve account deposit, as required by Sec.  240.15c3-3,
the broker or dealer must immediately notify the Commission and the
regulatory authority for the broker or dealer, which examines such
broker or dealer as to financial responsibility and must promptly
thereafter confirm such notification in writing.

* * * * *
    (o) Filing requirements. For purposes of filing requirements as
described in this section, filing will be deemed to have been
accomplished upon receipt at the Commission's principal office in
Washington, DC, with duplicate originals simultaneously filed at the
locations prescribed in the particular paragraph of this section which
is applicable.
* * * * *

0
8. Section 240.17a-11 is amended by:
0
a. Adding introductory text;
0
b. Removing paragraph (a);
0
c. Redesignating paragraphs (b) through (i) as paragraphs (a) through
(d) and (g) through (j);
0
d. Revising newly redesignated paragraphs (a), (b) introductory text,
(c), and (d);
0
e. Adding new reserved paragraph (e) and paragraph (f); and
0
f. Revising newly redesignated paragraphs (g) through (j).
    The revisions and additions read as follows:

Sec.  240.17a-11   Notification provisions for brokers and dealers.

    This section applies to the following types of entities: Except as
provided in this introductory text, a broker or dealer, including an
OTC derivatives dealer as that term is defined in Sec.  240.3b-12,
registered pursuant to section 15 of the Act (15 U.S.C. 78o); a broker
or dealer, other than an OTC derivatives dealer, registered pursuant to
section 15 of the Act that is also a security-based swap dealer
registered pursuant to section 15F of the Act (15 U.S.C. 78o-10); and a
broker or dealer, including an OTC derivatives dealer, registered
pursuant to section 15 of the Act that is also a major-security-based
swap participant registered pursuant to section 15F of the Act. Section
240.18a-8 (rather than this section) applies to the following types of
entities: A security-based swap dealer registered pursuant to section
15F of the Act that is not also a broker or dealer, other than an OTC
derivatives dealer, registered pursuant to section 15 of the Act; a
security-based swap dealer registered pursuant to section 15F of the
Act that is also an OTC derivatives dealer; and a major security-based
swap participant registered pursuant to section 15F of the Act that is
not also a broker or dealer, including an OTC derivatives dealer,
registered pursuant to section 15 of the Act.
    (a)(1) Every broker or dealer whose net capital declines below the
minimum amount required pursuant to Sec.  240.15c3-1, or is insolvent
as that term is defined in Sec.  240.15c3-1(c)(16), must give notice of
such deficiency that same day in accordance with paragraph (h) of this
section. The notice must specify the broker or dealer's net capital
requirement and its current amount of net capital. If a broker or
dealer is informed by its designated examining authority or the
Commission that it is, or has been, in violation of Sec.  240.15c3-1
and the broker or dealer has not given notice of the capital deficiency
under this section, the broker or dealer, even if it does not agree
that it is, or has been, in violation of Sec.  240.15c3-1, must give
notice of the claimed deficiency, which notice may specify the broker's
or dealer's reasons for its disagreement.
    (2) In addition to the requirements of paragraph (b)(1) of this
section, an OTC derivatives dealer or broker or dealer permitted to
compute net capital pursuant to the alternative method of Sec.
240.15c3-1e must also provide notice if its tentative net capital falls
below the minimum amount required pursuant to Sec.  240.15c3-1. The
notice must specify the tentative net capital requirements, and current
amount of net capital and tentative net capital, of the OTC derivatives
dealer or the broker or dealer permitted to compute net capital
pursuant to the alternative method of Sec.  240.15c3-1e.
    (b) Every broker or dealer must send notice promptly (but within 24
hours) after the occurrence of the events specified in paragraphs
(b)(1) through (5) of this section in accordance with paragraph (h) of
this section:
* * * * *
    (c) Every broker or dealer that fails to make and keep current the
books and records required by Sec.  240.17a-3, must give notice of this
fact that same day in accordance with paragraph (h) of this section,
specifying the books and records which have not been made or which are
not current. The broker or dealer must also transmit a report in
accordance with paragraph (h) of this section within 48 hours of the
notice stating what the broker or dealer has done or is doing to
correct the situation.
    (d) Whenever any broker or dealer discovers, or is notified by an
independent public accountant under Sec.  240.17a-12(i)(2), of the
existence of any material inadequacy as defined in Sec.  240.17a-
12(h)(2), or whenever any broker or dealer discovers, or is notified by
an independent public accountant under Sec.  240.17a-5(h), of the
existence of any material weakness as defined in Sec.  240.17a-
5(d)(3)(iii), the broker or dealer must:
    (1) Give notice, in accordance with paragraph (h) of this section,
of the material inadequacy or material weakness within 24 hours of the
discovery or notification of the material inadequacy or material
weakness; and
    (2) Transmit a report in accordance with paragraph (h) of this
section, within 48 hours of the notice stating

what the broker or dealer has done or is doing to correct the
situation.
    (e) [Reserved]
    (f) If a broker-dealer fails to make in its special reserve account
for the exclusive benefit of security-based swap customers a deposit,
as required by Sec.  240.15c3-3(p), the broker-dealer must give
immediate notice in writing in accordance with paragraph (h) of this
section.
    (g) Every national securities exchange or national securities
association that learns that a broker or dealer has failed to send
notice or transmit a report as required by this section, even after
being advised by the securities exchange or the national securities
association to send notice or transmit a report, must immediately give
notice of such failure in accordance with paragraph (h) of this
section.
    (h) Every notice or report required to be given or transmitted by
this section must be given or transmitted to the principal office of
the Commission in Washington DC and the regional office of the
Commission for the region in which the broker or dealer has its
principal place of business, or to an email address provided on the
Commission's website, and to the designated examining authority of
which such broker or dealer is a member, and to the Commodity Futures
Trading Commission (CFTC) if the broker or dealer is registered as a
futures commission merchant with the CFTC. The report required by
paragraph (c) or (d)(2) of this section may be transmitted by overnight
delivery.
    (i) Other notice provisions relating to the Commission's financial
responsibility or reporting rules are contained in Sec. Sec.  240.15c3-
1, 240.15c3-1d, 240.15c3-3, 240.17a-5, and 240.17a-12.
    (j) The provisions of this section will not apply to a broker or
dealer registered pursuant to section 15(b)(11)(A) of the Act (15
U.S.C. 78o(b)(11)(A)) that is not a member of either a national
securities exchange pursuant to section 6(a) of the Act (15 U.S.C.
78f(a)) or a national securities association registered pursuant to
section 15A(a) of the Act (15 U.S.C. 78o-3(a)).

Sec.  240.17a-12   [Amended]

0
9. Section 240.17a-12 is amended by removing ``Part IIB'' and adding in
its place ``Part II'' each time it appears.

0
10. Section 240.18a-1 is amended by adding paragraphs (d)(9)(iii)(A)
and (B) to read as follows:

Sec.  240.18a-1   Net capital requirements for security-based swap
dealers for which there is not a prudential regulator.

* * * * *
    (d) * * *
    (9) * * *
    (iii) * * *
    (A) The security-based swap dealer fails to meet the reporting
requirements set forth in Sec.  240.18a-7;
    (B) Any event specified in Sec.  240.18a-8 occurs;
* * * * *

0
11. Section 240.18a-5 is added to read as follows:

Sec.  240.18a-5   Records to be made by certain security-based swap
dealers and major security-based swap participants.

    This section applies to the following types of entities: A
security-based swap dealer registered pursuant to section 15F of the
Act (15 U.S.C. 78o-10) that is not also a broker or dealer, including
an OTC derivatives dealer as that term is defined in Sec.  240.3b-12,
registered pursuant to section 15 of the Act (15 U.S.C. 78o); and a
major security-based swap participant registered pursuant to section
15F of the Act that is not also a broker or dealer, including an OTC
derivatives dealer, registered pursuant to section 15 of the Act.
Section 240.17a-3 (rather than this section) applies to the following
types of entities: A member of a national securities exchange who
transacts a business in securities directly with others than members of
a national securities exchange; a broker or dealer who transacts a
business in securities through the medium of a member of a national
securities exchange; a broker or dealer, including an OTC derivatives
dealer, registered pursuant to section 15 of the Act; a security-based
swap dealer registered pursuant to section 15F of the Act that is also
a broker or dealer, including an OTC derivatives dealer, registered
pursuant to section 15 of the Act; and a major security-based swap
participant registered pursuant to section 15F of the Act that is also
a broker or dealer, including an OTC derivatives dealer, registered
pursuant to section 15 of the Act.
    (a) This paragraph (a) applies only to security-based swap dealers
and major security-based swap participants registered under section 15F
of the Act for which there is no prudential regulator. Each security-
based swap dealer and major security-based swap participant subject to
this paragraph (a) must make and keep current the following books and
records:
    (1) Blotters (or other records of original entry) containing an
itemized daily record of all purchases and sales of securities
(including security-based swaps), all receipts and deliveries of
securities (including certificate numbers), all receipts and
disbursements of cash and all other debits and credits. Such records
must show the account for which each such purchase or sale was
effected, the name and amount of securities, the unit and aggregate
purchase or sale price, if any (including the financial terms for
security-based swaps), the trade date, and the name or other
designation of the person from whom such securities were purchased or
received or to whom sold or delivered. For security-based swaps, such
records must also show, for each transaction, the type of security-
based swap, the reference security, index, or obligor, the date and
time of execution, the effective date, the scheduled termination date,
the notional amount(s) and the currenc(ies) in which the notional
amount(s) is expressed, the unique transaction identifier, and the
counterparty's unique identification code.
    (2) Ledgers (or other records) reflecting all assets and
liabilities, income and expense and capital accounts.
    (3) Ledger accounts (or other records) itemizing separately as to
each account for every customer or non-customer of such security-based
swap dealer or major security-based swap participant, all purchases and
sales, receipts and deliveries of securities (including security-based
swaps) and commodities for such account and all other debits and
credits to such account; and in addition, for a security-based swap,
the type of security-based swap, the reference security, index, or
obligor, the date and time of execution, the effective date, the
scheduled termination date, the notional amount(s) and the currenc(ies)
in which the notional amount(s) is expressed, the unique transaction
identifier, and the counterparty's unique identification code.
    (4) A securities record or ledger reflecting separately for each:
    (i) Security, other than a security-based swap, as of the clearance
dates all ``long'' or ``short'' positions (including securities in
safekeeping and securities that are the subjects of repurchase or
reverse repurchase agreements) carried by such security-based swap
dealer or major security-based swap participant for its account or for
the account of its customers and showing the location of all securities
long and the offsetting position to all securities short, including
long security count differences and short security count differences
classified by the date of the physical

count and verification in which they were discovered, and, in all cases
the name or designation of the account in which each position is
carried.
    (ii) Security-based swap, the reference security, index, or
obligor, the unique transaction identifier, the counterparty's unique
identification code, whether it is a ``bought'' or ``sold'' position in
the security-based swap, whether the security-based swap is cleared or
not cleared, and if cleared, identification of the clearing agency
where the security-based swap is cleared.
    (5) A memorandum of each purchase or sale of a security-based swap
for the account of the security-based swap dealer or major security-
based swap participant showing the price. The memorandum must also
include the type of security-based swap, the reference security, index,
or obligor, the date and time of execution, the effective date, the
scheduled termination date, the notional amount(s) and the currenc(ies)
in which the notional amount(s) is expressed, the unique transaction
identifier, and the counterparty's unique identification code. An order
entered pursuant to the exercise of discretionary authority must be so
designated.
    (6) With respect to a security other than a security-based swap,
copies of confirmations of all purchases and sales of securities. With
respect to a security-based swap, copies of the security-based swap
trade acknowledgment and verification made in compliance with Sec.
240.15Fi-2.
    (7) For each security-based swap account, a record of the unique
identification code of such counterparty, the name and address of such
counterparty, and a record of the authorization of each person the
counterparty has granted authority to transact business in the
security-based swap account.
    (8) A record of all puts, calls, spreads, straddles and other
options in which such security-based swap dealer or major security-
based swap participant has any direct or indirect interest or which
such security-based swap dealer or major security-based swap
participant has granted or guaranteed, containing, at least, an
identification of the security, and the number of units involved.
    (9) A record of the proof of money balances of all ledger accounts
in the form of trial balances, and a record of the computation of net
capital or tangible net worth, as applicable, as of the trial balance
date, pursuant to Sec.  240.18a-1 or Sec.  240.18a-2, respectively.
Such trial balances and computations must be prepared currently at
least once per month.
    (10)(i) A questionnaire or application for employment executed by
each ``associated person'' (as defined in paragraph (d) of this
section) of the security-based swap dealer or major security-based swap
participant who effects or is involved in effecting security-based
swaps on the security-based swap dealer's or major security-based swap
participant's behalf, which questionnaire or application must be
approved in writing by an authorized representative of the security-
based swap dealer or major security-based swap participant and must
contain at least the following information with respect to the
associated person:
    (A) The associated person's name, address, social security number,
and the starting date of the associated person's employment or other
association with the security-based swap dealer or major security-based
swap participant;
    (B) The associated person's date of birth;
    (C) A complete, consecutive statement of all the associated
person's business connections for at least the preceding ten years,
including whether the employment was part-time or full-time;
    (D) A record of any denial of membership or registration, and of
any disciplinary action taken, or sanction imposed, upon the associated
person by any Federal or state agency, or by any national securities
exchange or national securities association, including any finding that
the associated person was a cause of any disciplinary action or had
violated any law;
    (E) A record of any denial, suspension, expulsion or revocation of
membership or registration of any broker, dealer, security-based swap
dealer or major security-based swap participant with which the
associated person was associated in any capacity at the time such
action was taken;
    (F) A record of any permanent or temporary injunction entered
against the associated person, or any broker, dealer, security-based
swap dealer or major security-based swap participant with which the
associated person was associated in any capacity at the time such
injunction was entered;
    (G) A record of any arrest or indictment for any felony, or any
misdemeanor pertaining to securities, commodities, banking, insurance
or real estate (including, but not limited to, acting or being
associated with a broker or dealer, security-based swap dealer, major
security-based swap participant, investment company, investment
adviser, futures sponsor, bank, or savings and loan association),
fraud, false statements or omissions, wrongful taking of property or
bribery, forgery, counterfeiting or extortion, and the disposition of
the foregoing; and
    (H) A record of any other name or names by which the associated
person has been known or which the associated person has used.
    (ii) A record listing every associated person of the security-based
swap dealer or major security-based swap participant which shows, for
each associated person, every office of the security-based swap dealer
or major security-based swap participant where the associated person
regularly conducts the business of handling funds or securities or
effecting any transactions in, or inducing or attempting to induce the
purchase or sale of any security, for the security-based swap dealer or
major security-based swap participant and the Central Registration
Depository number, if any, and every internal identification number or
code assigned to that person by the security-based swap dealer or major
security-based swap participant.
    (11) [Reserved]
    (12) A record of the daily calculation of the current exposure and,
if applicable, the initial margin amount for each account of a
counterparty required under Sec.  240.18a-3(c).
    (13) A record of compliance with possession or control requirements
under Sec.  240.18a-4(b).
    (14) A record of the reserve computation required under Sec.
240.18a-4(c).
    (15) A record of each security-based swap transaction that is not
verified under Sec.  240.15Fi-2 within five business days of execution
that includes, at a minimum, the unique transaction identifier and the
counterparty's unique identification code.
    (16) A record documenting that the security-based swap dealer has
complied with the business conduct standards as required under Sec.
240.15Fh-6.
    (17) A record documenting that the security-based swap dealer or
major security-based swap participant has complied with the business
conduct standards as required under Sec. Sec.  240.15Fh-1 through
240.15Fh-5 and 240.15Fk-1.
    (18) [Reserved]
    (b) This paragraph (b) applies only to security-based swap dealers
and major security-based swap participants registered under section 15F
of the Act for which there is a prudential regulator. Each security-
based swap dealer and major security-based swap participant subject to
this paragraph (b) must make and keep current the following books and
records:

    (1) For security-based swaps and any other positions related to the
firm's business as such, blotters (or other records of original entry)
containing an itemized daily record of all purchases and sales of
securities (including security-based swaps), all receipts and
deliveries of securities (including certificate numbers), all receipts
and disbursements of cash and all other debits and credits. Such
records must show, the account for which each such purchase and sale
was effected, the name and amount of securities, the unit and aggregate
purchase or sale price (if any, including the financial terms for
security-based swaps), the trade date, and the name or other
designation of the person from whom such securities were purchased or
received or to whom sold or delivered. For security-based swaps, such
records must also show, for each transaction, the type of security-
based swap, the reference security, index, or obligor, the date and
time of execution, the effective date, the scheduled termination date,
the notional amount(s) and the currenc(ies) in which the notional
amount(s) is expressed, the unique transaction identifier, and the
counterparty's unique identification code.
    (2) Ledger accounts (or other records) itemizing separately as to
each account for every security-based swap customer or non-customer of
such security-based swap dealer or major security-based swap
participant, all purchases, sales, receipts and deliveries of
securities (including security-based swaps) and commodities for such
account and all other debits and credits to such account; and in
addition, for a security-based swap, the type of security-based swap,
the reference security, index, or obligor, the date and time of
execution, the effective date, the scheduled termination date, the
notional amount(s) and the currenc(ies) in which the notional amount(s)
is expressed, the unique transaction identifier, and the counterparty's
unique identification code.
    (3) For security-based swaps and any securities positions related
to the firm's business as a security-based swap dealer or a major
security-based swap participant, a securities record or ledger
reflecting separately for each:
    (i) Security, other than a security-based swap, as of the clearance
dates all ``long'' or ``short'' positions (including securities in
safekeeping and securities that are the subjects of repurchase or
reverse repurchase agreements) carried by such security-based swap
dealer or major security-based swap participant for its account or for
the account of its customers and showing the location of all securities
long and the offsetting position to all securities short, including
long security count differences and short security count differences
classified by the date of the physical count and verification in which
they were discovered, and in all cases the name or designation of the
account in which each position is carried.
    (ii) Security-based swap, the reference security, index, or
obligor, the unique transaction identifier, the counterparty's unique
identification code, whether it is a ``bought'' or ``sold'' position in
the security-based swap, whether the security-based swap is cleared or
not cleared, and if cleared, identification of the clearing agency
where the security-based swap is cleared.
    (4) A memorandum of each brokerage order, and of any other
instruction, given or received for the purchase or sale of a security-
based swap, whether executed or unexecuted. The memorandum must show
the terms and conditions of the order or instructions and of any
modification or cancellation thereof; the account for which entered;
the time the order was received; the time of entry; the price at which
executed; the identity of each associated person, if any, responsible
for the account; the identity of any other person who entered or
accepted the order on behalf of the customer, or, if a customer entered
the order on an electronic system, a notation of that entry; and, to
the extent feasible, the time of execution or cancellation. The
memorandum also must include the type of the security-based swap, the
reference security, index, or obligor, the date and time of execution,
the effective date, the scheduled termination date, the notional
amount(s) and the currenc(ies) in which the notional amount(s) is
expressed, the unique transaction identifier, and the counterparty's
unique identification code. An order entered pursuant to the exercise
of discretionary authority by the security-based swap dealer or major
security-based swap participant, or associated person thereof, must be
so designated. The term instruction must include instructions between
partners and employees of a security-based swap dealer or major
security-based swap participant. The term time of entry means the time
when the security-based swap dealer or major security-based swap
participant transmits the order or instruction for execution.
    (5) A memorandum of each purchase or sale of a security-based swap
for the account of the security-based swap dealer or major security-
based swap participant showing the price. The memorandum must also
include the type of security-based swap, the reference security, index,
or obligor, the date and time of execution, the effective date, the
scheduled termination date, the notional amount(s) and the currenc(ies)
in which the notional amount(s) is expressed, the unique transaction
identifier, and the counterparty's unique identification code. An order
entered pursuant to the exercise of discretionary authority must be so
designated.
    (6) With respect to a security other than a security-based swap,
copies of confirmations of all purchases and sales of securities
related to the business of a security-based swap dealer or major
security-based swap participant. With respect to a security-based swap,
copies of the security-based swap trade acknowledgment and verification
made in compliance with Sec.  240.15Fi-2.
    (7) For each security-based swap account, a record of the
counterparty's unique identification code, the name and address of such
counterparty, and a record of the authorization of each person the
counterparty has granted authority to transact business in the
security-based swap account.
    (8)(i) A questionnaire or application for employment executed by
each ``associated person'' (as defined in paragraph (c) of this
section) of the security-based swap dealer or major security-based swap
participant who effects or is involved in effecting security-based
swaps on the security-based swap dealer's or major security-based swap
participant's behalf, which questionnaire or application must be
approved in writing by an authorized representative of the security-
based swap dealer or major security-based swap participant and must
contain at least the following information with respect to the
associated person:
    (A) The associated person's name, address, social security number,
and the starting date of the associated person's employment or other
association with the security-based swap dealer or major security-based
swap participant;
    (B) The associated person's date of birth;
    (C) A complete, consecutive statement of all the associated
person's business connections for at least the preceding ten years,
including whether the employment was part-time or full-time;
    (D) A record of any denial of membership or registration, and of
any disciplinary action taken, or sanction imposed, upon the associated
person by any Federal or state agency, or by any national securities
exchange or national securities association, including any finding that
the associated person was a

cause of any disciplinary action or had violated any law;
    (E) A record of any denial, suspension, expulsion or revocation of
membership or registration of any broker, dealer, security-based swap
dealer or major security-based swap participant with which the
associated person was associated in any capacity at the time such
action was taken;
    (F) A record of any permanent or temporary injunction entered
against the associated person, or any broker, dealer, security-based
swap dealer or major security-based swap participant with which the
associated person was associated in any capacity at the time such
injunction was entered;
    (G) A record of any arrest or indictment for any felony, or any
misdemeanor pertaining to securities, commodities, banking, insurance
or real estate (including, but not limited to, acting or being
associated with a broker or dealer, security-based swap dealer, major
security-based swap participant, investment company, investment
adviser, futures sponsor, bank, or savings and loan association),
fraud, false statements or omissions, wrongful taking of property or
bribery, forgery, counterfeiting or extortion, and the disposition of
the foregoing; and
    (H) A record of any other name or names by which the associated
person has been known or which the associated person has used.
    (ii) A record listing every associated person of the security-based
swap dealer or major security-based swap participant which shows, for
each associated person, every office of the security-based swap dealer
or major security-based swap participant where the associated person
regularly conducts the business of handling funds or securities or
effecting any transactions in, or inducing or attempting to induce the
purchase or sale of any security, for the security-based swap dealer or
major security-based swap participant and every internal identification
number or code assigned to that person by the security-based swap
dealer or major security-based swap participant.
    (9) A record of compliance with possession or control requirements
under Sec.  240.18a-4(b).
    (10) A record of the reserve computation required under Sec.
240.18a-4(c).
    (11) A record of each security-based swap transaction that is not
verified under Sec.  240.15Fi-2 within five business days of execution
that includes, at a minimum, the unique transaction identifier and the
counterparty's unique identification code.
    (12) A record documenting that the security-based swap dealer has
complied with the business conduct standards as required under Sec.
240.15Fh-6.
    (13) A record documenting that the security-based swap dealer or
major security-based swap participant has complied with the business
conduct standards as required under Sec.  240.15Fh-1 through Sec.
240.15Fh-5 and Sec.  240.15Fk-1.
    (14) [Reserved]
    (c) A security-based swap dealer or major security-based swap
participant may comply with the recordkeeping requirements of the
Commodity Exchange Act and chapter I of this title applicable to swap
dealers and major swap participants in lieu of complying with
paragraphs (a)(1), (3), and (4) or paragraphs (b)(1) through (3) of
this section, as applicable, solely with respect to required
information regarding security-based swap transactions and positions
if:
    (1) The security-based swap dealer or major security-based swap
participant is registered as a security-based swap dealer or major
security-based swap participant pursuant to section 15F of the Act;
    (2) The security-based swap dealer or major security-based swap
participant is registered as a swap dealer or major swap participant
pursuant to section 4s of the Commodity Exchange Act and chapter I of
this title;
    (3) The security-based swap dealer or major security-based swap
participant is subject to 17 CFR 23.201, 23.202, 23.402, and 23.501
with respect to its swap-related books and records;
    (4) The security-based swap dealer or major security-based swap
participant preserves all of the data elements necessary to create the
records required by paragraphs (a)(1), (3), and (4) or paragraphs
(b)(1) through (3) of this section, as applicable, as they pertain to
security-based swap and swap transactions and positions;
    (5) The security-based swap dealer or major security-based swap
participant upon request furnishes promptly to representatives of the
Commission the records required by paragraphs (a)(1), (3), and (4) or
paragraphs (b)(1) through (3) of this section, as applicable, as well
as the records required by 17 CFR 23.201, 23.202, 23.402, and 23.501 as
they pertain to security-based swap and swap transactions and positions
in the format applicable to that category of record as set forth in
this section; and
    (6) The security-based swap dealer or major security-based swap
participant provides notice of its intent to utilize this paragraph (c)
by notifying in writing the Commission, both at the principal office of
the Commission in Washington, DC and at the regional office of the
Commission for the region in which the registrant has its principal
place of business.
    (d)(1) The term associated person means for purposes of this
section a person associated with a security-based swap dealer or major
security-based swap participant as that term is defined in section
3(a)(70) of the Act (15 U.S.C. 78c(a)(70)).
    (2) The term associated person, as to an entity supervised by a
prudential regulator, includes only those persons whose activities
relate to its business as a security-based swap dealer or major
security-based swap participant.

0
12. Section 240.18a-6 is added to read as follows:

Sec.  240.18a-6   Records to be preserved by certain security-based
swap dealers and major security-based swap participants.

    This section applies to the following types of entities: A
security-based swap dealer registered pursuant to section 15F of the
Act (15 U.S.C. 78o-10) that is not also a broker or dealer, including
an OTC derivatives dealer as that term is defined in Sec.  240.3b-12,
registered pursuant to section 15 of the Act (15 U.S.C. 78o); and a
major security-based swap participant registered pursuant to section
15F of the Act that is not also a broker or dealer, including an OTC
derivatives dealer, registered pursuant to section 15 of the Act.
Section 240.17a-4 (rather than this section) applies to the following
types of entities: A member of a national securities exchange who
transacts a business in securities directly with others than members of
a national securities exchange; a broker or dealer who transacts a
business in securities through the medium of a member of a national
securities exchange; a broker or dealer, including an OTC derivatives
dealer, registered pursuant to section 15 of the Act; a security-based
swap dealer registered pursuant to section 15F of the Act that is also
a broker or dealer, including an OTC derivatives dealer, registered
pursuant to section 15 of the Act; and a major security-based swap
participant registered pursuant to section 15F of the Act that is also
a broker or dealer, including an OTC derivatives dealer, registered
pursuant to section 15 of the Act.
    (a)(1) Every security-based swap dealer and major security-based
swap participant for which there is no prudential regulator must
preserve for a period not less than six years, the first two years in
an easily accessible place,

all records required to be made pursuant to Sec.  240.18a-5(a)(1)
through (4).
    (2) Every security-based swap dealer and major security-based swap
participant for which there is a prudential regulator must preserve for
a period not less than six years, the first two years in an easily
accessible place, all records required to be made pursuant to Sec.
240.18a-5(b)(1) through (3).
    (b)(1) Every security-based swap dealer and major security-based
swap participant for which there is no prudential regulator must
preserve for a period of not less than three years, the first two years
in an easily accessible place:
    (i) All records required to be made pursuant to Sec.  240.18a-
5(a)(5) through (9) and (12) through (17).
    (ii) All check books, bank statements, cancelled checks, and cash
reconciliations.
    (iii) All bills receivable or payable (or copies thereof), paid or
unpaid, relating to the business of such security-based swap dealer or
major security-based swap participant, as such.
    (iv) Originals of all communications received and copies of all
communications sent (and any approvals thereof) by the security-based
swap dealer or major security-based swap participant (including inter-
office memoranda and communications) relating to its business as such.
As used in this paragraph (b)(1)(iv), the term ``communications''
includes sales scripts and recordings of telephone calls required to be
maintained pursuant to section 15F(g)(1) of the Act (15 U.S.C. 78o-
10(g)(1)).
    (v) All trial balances and computations of net capital or tangible
net worth requirements (and working papers in connection therewith), as
applicable, financial statements, branch office reconciliations, and
internal audit working papers, relating to the business of such
security-based swap dealer or major security-based swap participant as
such.
    (vi) All guarantees of security-based swap accounts and all powers
of attorney and other evidence of the granting of any discretionary
authority given in respect of any security-based swap account, and
copies of resolutions empowering an agent to act on behalf of a
corporation.
    (vii) All written agreements (or copies thereof) entered into by
such security-based swap dealer or major security-based swap
participant relating to its business as such, including agreements with
respect to any account. Written agreements with respect to a security-
based swap customer or non-customer, including governing documents or
any document establishing the terms and conditions of the customer's or
non-customer's security-based swaps must be maintained with the
customer's or non-customer's account records.
    (viii) Records which contain the following information in support
of amounts included in the report prepared as of the audit date on Part
II of Form X-17A-5 (Sec.  249.617 of this chapter) and in annual
financial statements required by Sec.  240.18a-7(d):
    (A) Money balance and position, long or short, including
description, quantity, price, and valuation of each security, including
contractual commitments, in security-based swap customers' accounts, in
fully secured accounts, partly secured accounts, unsecured accounts,
and in securities accounts payable to security-based swap customers;
    (B) Money balance and position, long or short, including
description, quantity, price, and valuation of each security, including
contractual commitments, in security-based swap non-customers'
accounts, in fully secured accounts, partly secured accounts, unsecured
accounts, and in security-based swap accounts payable to non-security-
based swap customers;
    (C) Position, long or short, including description, quantity,
price, and valuation of each security, including contractual
commitments, included in the Computation of Net Capital as commitments,
securities owned, securities owned not readily marketable, and other
investments owned not readily marketable;
    (D) Description of futures commodity contracts or swaps, contract
value on trade date, market value, gain or loss, and liquidating equity
or deficit in customers' and non-customers' accounts;
    (E) Description of futures commodity contracts or swaps, contract
value on trade date, market value, gain or loss and liquidating equity
or deficit in trading and investment accounts;
    (F) Description, money balance, quantity, price, and valuation of
each spot commodity and swap position or commitments in customers' and
non-customers' accounts;
    (G) Description, money balance, quantity, price, and valuation of
each spot commodity and swap position or commitments in trading and
investment accounts;
    (H) Number of shares, description of security, exercise price,
cost, and market value of put and call options, including short out of
the money options having no market or exercise value, showing listed
and unlisted put and call options separately;
    (I) Quantity, price, and valuation of each security underlying the
haircut for undue concentration made in the Computation of Net Capital
pursuant to Sec.  240.18a-1;
    (J) Description, quantity, price, and valuation of each security
and commodity position or contractual commitment, long or short, in
each joint account in which the security-based swap dealer or major
security-based swap participant has an interest, including each
participant's interest and margin deposit;
    (K) Description, settlement date, contract amount, quantity, market
price, and valuation for each aged failed to deliver requiring a charge
in the Computation of Net Capital pursuant to Sec.  240.18a-1;
    (L) Detail relating to information for possession or control
requirements under Sec.  240.18a-4 and reported on Part II of Form X-
17A-5 (Sec.  249.617 of this chapter);
    (M) Detail of all items, not otherwise substantiated, which are
charged or credited in the Computation of Net Capital pursuant to
Sec. Sec.  240.18a-1 and 240.18a-2, such as cash margin deficiencies,
deductions related to securities values and undue concentration, aged
securities differences, and insurance claims receivable;
    (N) Detail relating to the calculation of the risk margin amount
pursuant to Sec.  240.18a-1(c)(6); and
    (O) Other schedules which are specifically prescribed by the
Commission as necessary to support information reported as required by
Sec.  240.18a-7.
    (ix) The records required to be made pursuant to Sec.  240.15c3-4
and the results of the periodic reviews conducted pursuant to Sec.
240.15c3-4(d).
    (x) The records required to be made pursuant to Sec.  240.18a-
1(e)(2)(iv)(F)(1) and (2).
    (xi) A copy of information required to be reported under Sec. Sec.
242.901 through 242.909 of this chapter (Regulation SBSR).
    (xii) Copies of documents, communications, disclosures, and notices
related to business conduct standards as required under Sec. Sec.
240.15Fh-1 through 240.15Fh-6 and 240.15Fk-1.
    (xiii) Copies of documents used to make a reasonable determination
with respect to special entities, including information relating to the
financial status, the tax status, and the investment or financing
objectives of the special entity as required under sections
15F(h)(4)(C) and (5)(A) of the Act (15 U.S.C. 78o-10(h)(4)(C) and
(5)(A)).

    (2) Every security-based swap dealer and major security-based swap
participant for which there is a prudential regulator must preserve for
a period of not less than three years, the first two years in an easily
accessible place:
    (i) All records required to be made pursuant to Sec.  240.18a-
5(b)(4) through (7) and (9) through (13).
    (ii) Originals of all communications received and copies of all
communications sent (and any approvals thereof) by the security-based
swap dealer or major security-based swap participant (including inter-
office memoranda and communications) relating to its business as a
security-based swap dealer or major security-based swap participant. As
used in this paragraph (b)(2)(ii), the term ``communications'' includes
sales scripts and recordings of telephone calls required to be
maintained pursuant to section 15F(g)(1) of the Act (15 U.S.C. 78o-
10(g)(1)).
    (iii) All guarantees of security-based swap accounts and all powers
of attorney and other evidence of the granting of any discretionary
authority given in respect of any security-based swap account, and
copies of resolutions empowering an agent to act on behalf of a
corporation.
    (iv) All written agreements (or copies thereof) entered into by
such security-based swap dealer or major security-based swap
participant relating to its business as a security-based swap dealer or
major security-based swap participant, including agreements with
respect to any account. Written agreements with respect to a security-
based swap customer or non-customer, including governing documents or
any document establishing the terms and conditions of the customer's or
non-customer's security-based swaps, must be maintained with the
customer's or non-customer's account records.
    (v) Detail relating to information for possession or control
requirements under Sec.  240.18a-4 and reported on Part IIC of Form X-
17A-5 (Sec.  249.617 of this chapter) that is in support of amounts
included in the report prepared as of the audit date on Part IIC of
Form X-17A-5 (Sec.  249.617 of this chapter) and in the registrant's
annual reports required by Sec.  240.18a-7(c).
    (vi) A copy of information required to be reported under Regulation
SBSR (Sec. Sec.  242.901 through 242.909 of this chapter).
    (vii) Copies of documents, communications, disclosures, and notices
related to business conduct standards as required under Sec. Sec.
240.15Fh-1 through 240.15Fh-6 and 240.15Fk-1.
    (viii) Copies of documents used to make a reasonable determination
with respect to special entities, including information relating to the
financial status, the tax status, and the investment or financing
objectives of the special entity as required under sections
15F(h)(4)(C) and (5)(A) of the Act.
    (c) Every security-based swap dealer and major security-based swap
participant subject to this section must preserve during the life of
the enterprise and of any successor enterprise all partnership articles
or, in the case of a corporation, all articles of incorporation or
charter, minute books, and stock certificate books (or, in the case of
any other form of legal entity, all records such as articles of
organization or formation and minute books used for a purpose similar
to those records required for corporations or partnerships), all Forms
SBSE (Sec.  249.1600 of this chapter), all Forms SBSE-A (Sec.
249.1600a of this chapter), all Forms SBSE-C (Sec.  249.1600c of this
chapter), all Forms SBSE-W (Sec.  249.1601 of this chapter), all
amendments to these forms, and all licenses or other documentation
showing the registration of the security-based swap dealer or major
security-based swap participant with any securities regulatory
authority or the Commodity Futures Trading Commission.
    (d) Every security-based swap dealer and major security-based swap
participant subject to this section must maintain and preserve in an
easily accessible place:
    (1) All records required under Sec.  240.18a-5(a)(10) or (b)(8)
until at least three years after the associated person's employment and
any other connection with the security-based swap dealer or major
security-based swap participant has terminated.
    (2)(i) For security-based swap dealers and major security-based
swap participants for which there is not a prudential regulator, each
report which a securities regulatory authority or the Commodity Futures
Trading Commission has requested or required the security-based swap
dealer or major security-based swap participant to make and furnish to
it pursuant to an order or settlement, and each securities regulatory
authority or Commodity Futures Trading Commission examination report
until three years after the date of the report.
    (ii) For security-based swap dealers and major security-based swap
participants for which there is a prudential regulator, each report
related to security-based swap activities which a securities regulatory
authority, the Commodity Futures Trading Commission, or a prudential
regulator has requested or required the security-based swap dealer or
major security-based swap participant to make and furnish to it
pursuant to an order or settlement, and each securities regulatory
authority, Commodity Futures Trading Commission, or prudential
regulator examination report until three years after the date of the
report.
    (3)(i) For security-based swap dealers and major security-based
swap participants for which there is not a prudential regulator, each
compliance, supervisory, and procedures manual, including any updates,
modifications, and revisions to the manual, describing the policies and
practices of the security-based swap dealer or major security-based
swap participant with respect to compliance with applicable laws and
rules, and supervision of the activities of each natural person
associated with the security-based swap dealer or major security-based
swap participant until three years after the termination of the use of
the manual.
    (ii) For security-based swap dealers and major security-based swap
participants for which there is a prudential regulator, each
compliance, supervisory, and procedures manual, including any updates,
modifications, and revisions to the manual, describing the policies and
practices of the security-based swap dealer or major security-based
swap participant with respect to compliance with applicable laws and
rules relating to security-based swap activities, and supervision of
the activities of each natural person associated with the security-
based swap dealer or major security-based swap participant until three
years after the termination of the use of the manual.
    (e) The records required to be maintained and preserved pursuant to
Sec. Sec.  240.18a-5 and 240.18a-6 may be immediately produced or
reproduced by means of an electronic storage system (as defined in this
paragraph (e)) that meets the conditions set forth in this paragraph
(e) and be maintained and preserved for the required time in that form.
    (1) For purposes of this section, the term electronic storage
system means any digital storage system that meets the applicable
conditions set forth in this paragraph (e).
    (2) If an electronic storage system is used by a security-based
swap dealer or major security-based swap participant, it must:

    (i) Verify automatically the quality and accuracy of the electronic
storage system recording process;
    (ii) If applicable, serialize the original and duplicate units of
the storage media, and time-date for the required period of retention
the information placed in such electronic storage system; and
    (iii) Have the capacity to readily download into a readable format
indexes and records preserved in the electronic storage system.
    (3) If a security-based swap dealer or major security-based swap
participant uses an electronic storage system, it must:
    (i) At all times have available, for examination by the staff of
the Commission, facilities for immediate, easily readable projection or
production of records or images maintained on the electronic storage
system and for producing easily readable representations of those
records or images.
    (ii) Be ready at all times to immediately provide in a readable
format any record or index stored on the electronic storage system
which the staff of the Commission may request.
    (iii) Store separately from the original a duplicate copy of a
record stored on the electronic storage system for the time required.
    (iv) Organize and index accurately all information maintained on
both original and any duplicate storage system.
    (A) At all times, a security-based swap dealer or major security-
based swap participant must be able to have such indexes available for
examination by the staff of the Commission.
    (B) Each index must be duplicated and the duplicate copies must be
stored separately from the original copy of each index.
    (C) Original and duplicate indexes must be preserved for the time
required for the indexed records.
    (v) Have in place an audit system providing for accountability
regarding inputting of records required to be maintained and preserved
pursuant to Sec. Sec.  240.18a-5 and 240.18a-6 to the electronic
storage system and inputting of any changes made to every original and
duplicate record maintained and preserved thereby.
    (A) At all times the security-based swap dealer or major security-
based swap participant must be able to have the results of such audit
system available for examination by the staff of the Commission.
    (B) The audit results must be preserved for the time required for
the audited records.
    (vi) The security-based swap dealer or major security-based swap
participant must maintain, keep current, and provide promptly upon
request by the staff of the Commission all information necessary to
access records and indexes stored in the electronic storage system; or
place in escrow and keep current a copy of the physical and logical
file format of the electronic storage system, the field format of all
different information types written on the electronic storage system
and the source code, together with the appropriate documentation and
information necessary to access records and indexes.
    (f)(1) If the records required to be maintained and preserved
pursuant to the provisions of Sec. Sec.  240.18a-5 and 240.18a-6 are
prepared or maintained by a third party on behalf of the security-based
swap dealer or major security-based swap participant, the third party
must file with the Commission a written undertaking in a form
acceptable to the Commission, signed by a duly authorized person, to
the effect that such records are the property of the security-based
swap dealer or major security-based swap participant and will be
surrendered promptly on request of the security-based swap dealer or
major security-based swap participant and including the following
provision:

    With respect to any books and records maintained or preserved on
behalf of [SBSD or MSBSP], the undersigned hereby undertakes to
permit examination of such books and records at any time or from
time to time during business hours by representatives or designees
of the Securities and Exchange Commission, and to promptly furnish
to said Commission or its designee true, correct, complete, and
current hard copies of any or all or any part of such books and
records.

    (2) Agreement with an outside entity will not relieve such
security-based swap dealer or major security-based swap participant
from the responsibility to prepare and maintain records as specified in
this section or in Sec.  240.18a-5.
    (g) Every security-based swap dealer and major security-based swap
participant subject to this section must furnish promptly to a
representative of the Commission legible, true, complete, and current
copies of those records of the security-based swap dealer or major
security-based swap participant that are required to be preserved under
this section, or any other records of the security-based swap dealer or
major security-based swap participant subject to examination or
required to be made or maintained pursuant to section 15F of the Act
that are requested by a representative of the Commission.
    (h) When used in this section:
    (1) The term securities regulatory authority means the Commission,
any self-regulatory organization, or any securities commission (or any
agency or office performing like functions) of the States.
    (2) The term associated person has the meaning set forth in Sec.
240.18a-5(d).

0
13. Section 240.18a-7 is added to read as follows:

Sec.  240.18a-7   Reports to be made by certain security-based swap
dealers and major security-based swap participants.

    This section applies to the following types of entities: A
security-based swap dealer registered pursuant to section 15F of the
Act (15 U.S.C. 78o-10) that is not also a broker or dealer, other than
an OTC derivatives dealer as that term is defined in Sec.  240.3b-12,
registered pursuant to section 15 of the Act (15 U.S.C. 78o); a
security-based swap dealer registered pursuant to section 15F of the
Act that is also an OTC derivatives dealer registered pursuant to
section 15 of the Act; and a major security-based swap participant
registered pursuant to section 15F of the Act that is not also a broker
or dealer, including an OTC derivatives dealer, registered pursuant to
section 15 of the Act. Section 240.17a-5 (rather than this section)
applies to the following types of entities: Except as provided above, a
broker or dealer, including an OTC derivatives dealer, registered
pursuant to section 15 of the Act; a broker or dealer, other than an
OTC derivatives dealer, registered pursuant to section 15 of the Act
that is also a security-based swap dealer registered pursuant to
section 15F of the Act; and a broker or dealer, including an OTC
derivatives dealer, registered pursuant to section 15 of the Act that
is also a major-security-based swap participant registered pursuant to
section 15F of the Act.
    (a) Filing of reports. (1) Every security-based swap dealer or
major security-based swap participant for which there is no prudential
regulator must file with the Commission or its designee Part II of Form
X-17A-5 (Sec.  249.617 of this chapter) within 17 business days after
the end of each month.
    (2) Every security-based swap dealer or major security-based swap
participant for which there is a prudential regulator must file with
the Commission or its designee Part IIC of Form X-17A-5 (Sec.  249.617
of this chapter) within 30 calendar days after the end of each calendar
quarter.

    (3) Security-based swap dealers that have been authorized by the
Commission to compute net capital pursuant to Sec.  240.18a-1(d), must
file the following additional reports with the Commission:
    (i) For each product for which the security-based swap dealer
calculates a deduction for market risk other than in accordance with
Sec.  240.18a-1(e)(1)(i) and (iii), the product category and the amount
of the deduction for market risk within 17 business days after the end
of the month;
    (ii) A graph reflecting, for each business line, the daily intra-
month value at risk within 17 business days after the end of the month;
    (iii) The aggregate value at risk for the security-based swap
dealer within 17 business days after end of the month;
    (iv) For each product for which the security-based swap dealer uses
scenario analysis, the product category and the deduction for market
risk within 17 business days after the end of the month;
    (v) Credit risk information on security-based swap, mixed swap and
swap exposures, within 17 business days after the end of the month,
including:
    (A) Overall current exposure;
    (B) Current exposure (including commitments) listed by counterparty
for the 15 largest exposures;
    (C) The ten largest commitments listed by counterparty;
    (D) The broker's or dealer's maximum potential exposure listed by
counterparty for the 15 largest exposures;
    (E) The broker's or dealer's aggregate maximum potential exposure;
    (F) A summary report reflecting the broker's or dealer's current
and maximum potential exposures by credit rating category; and
    (G) A summary report reflecting the broker's or dealer's current
exposure for each of the top ten countries to which the broker or
dealer is exposed (by residence of the main operating group of the
counterparty);
    (vi) Regular risk reports supplied to the security-based swap
dealer's senior management in the format described in the application,
within 17 business days after the end of the month;
    (vii) [Reserved]
    (viii) A report identifying the number of business days for which
the actual daily net trading loss exceeded the corresponding daily VaR
within 17 business days after the end of each calendar quarter; and
    (ix) The results of backtesting of all internal models used to
compute allowable capital, including VaR and credit risk models,
indicating the number of backtesting exceptions within 17 business days
after the end of each calendar quarter.
    (b) Customer disclosures. (1) Every security-based swap dealer or
major security-based swap participant for which there is no prudential
regulator must make publicly available on its website within 10
business days after the date the firm is required to file with the
Commission the annual reports pursuant to paragraph (c) of this
section:
    (i) A Statement of Financial Condition with appropriate notes
prepared in accordance with U.S. generally accepted accounting
principles which must be audited;
    (ii) A statement of the amount of the security-based swap dealer's
net capital and its required net capital, computed in accordance with
Sec.  240.18a-1. Such statement must include summary financial
statements of subsidiaries consolidated pursuant to Sec.  240.18a-1c
(appendix C to Sec.  240.18a-1 (Rule 18a-1)), where material, and the
effect thereof on the net capital and required net capital of the
security-based swap dealer; and
    (iii) If, in connection with the most recent annual reports
required under paragraph (c) of this section, the report of the
independent public accountant required under paragraph (c)(1)(i)(C) of
this section covering the report of the security-based swap dealer
required under paragraph (c)(1)(i)(B)(1) of this section identifies one
or more material weaknesses, a copy of the report.
    (2) Every security-based swap dealer or major security-based swap
participant for which there is no prudential regulator must make
publicly available on its website unaudited statements as of the date
that is 6 months after the date of the most recent audited statements
filed with the Commission under paragraph (c)(1) of this section. These
reports must be made publicly available within 30 calendar days of the
date of the statements.
    (3) The information that is made publicly available pursuant to
paragraphs (b)(1) and (2) of this section must also be made available
in writing, upon request, to any person that has a security-based swap
account. The security-based swap dealer or major security-based swap
participant must maintain a toll-free telephone number to receive such
requests.
    (c) Annual reports--(1) Reports required to be filed. (i) Except as
provided in paragraph (c)(1)(iii) of this section, every security-based
swap dealer or major security-based swap participant registered
pursuant to section 15F of the Act for which there is no prudential
regulator must file annually, as applicable:
    (A) A financial report as described in paragraph (c)(2) of this
section;
    (B)(1) If the security-based swap dealer did not claim it was
exempt from Sec.  240.18a-4 throughout the most recent fiscal year, a
compliance report as described in paragraph (c)(3) of this section
executed by the person who makes the oath or affirmation under
paragraph (d)(1) of this section; or
    (2) If the security-based swap dealer did claim it was exempt from
Sec.  240.18a-4 throughout the most recent fiscal year, an exemption
report as described in paragraph (c)(4) of this section executed by the
person who makes the oath or affirmation under paragraph (d)(1) of this
section; and
    (C) A report prepared by an independent public accountant, under
the engagement provisions in paragraph (e) of this section, covering
each report required to be filed under paragraphs (c)(1)(i)(A) and (B)
of this section, as applicable.
    (ii) The reports required to be filed under this paragraph (c) must
be as of the same fiscal year end each year, unless a change is
approved in writing by the Commission. The original request for a
change must be filed at the Commission's principal office in
Washington, DC. A copy of the written approval must be sent to the
regional office of the Commission for the region in which the security-
based swap dealer or major security-based swap participant has its
principal place of business.
    (iii) A security-based swap dealer or major security-based swap
participant succeeding to and continuing the business of another
security-based swap dealer or major security-based swap participant
need not file reports under this paragraph (c) as of a date in the
fiscal year in which the succession occurs if the predecessor security-
based swap dealer or major security-based swap participant has filed
the reports in compliance with this paragraph (c) as of a date in such
fiscal year.
    (2) Financial report. The financial report must contain:
    (i)(A) A Statement of Financial Condition, a Statement of Income, a
Statement of Cash Flows, a Statement of Changes in Stockholders' or
Partners' or Sole Proprietor's Equity, and Statement of Changes in
Liabilities Subordinated to Claims of General Creditors. The statements
must be prepared in accordance with U.S. generally accepted accounting
principles and must be in a format that is consistent with the

statements contained in Part II of Form X-17A-5 (Sec.  249.617 of this
chapter).
    (B) If there is other comprehensive income in the period(s)
presented, the financial report must contain a Statement of
Comprehensive Income (as defined in Sec.  210.1-02 of this chapter) in
place of a Statement of Income.
    (ii) Supporting schedules that include, from Part II of Form X-17A-
5 (Sec.  249.617 of this chapter), a Computation of Net Capital under
Sec.  240.18a-1, a Computation of Tangible Net Worth under Sec.
240.18a-2, a Computation for Determination of Security-Based Swap
Customer Reserve Requirements under Sec.  240.18a-4a (Exhibit A of
Sec.  240.18a-4), and Information Relating to the Possession or Control
Requirements for Security-Based Swap Customers under Sec.  240.18a-4,
as applicable.
    (iii) If any of the Computation of Net Capital under Sec.  240.18a-
1, the Computation of Tangible Net Worth under Sec.  240.18a-2, or the
Computation for Determination of Security-Based Swap Customer Reserve
Requirements under Exhibit A of Sec.  240.18a-4 in the financial report
is materially different from the corresponding computation in the most
recent Part II of Form X-17A-5 (Sec.  249.617 of this chapter) filed by
the registrant pursuant to paragraph (a) of this section, a
reconciliation, including appropriate explanations, between the
computation in the financial report and the computation in the most
recent Part II of Form X-17A-5 filed by the registrant. If no material
differences exist, a statement so indicating must be included in the
financial report.
    (3) Compliance report. (i) The compliance report must contain:
    (A) Statements as to whether:
    (1) The security-based swap dealer has established and maintained
Internal Control Over Compliance as that term is defined in paragraph
(c)(3)(ii) of this section;
    (2) The Internal Control Over Compliance of the security-based swap
dealer was effective during the most recent fiscal year;
    (3) The Internal Control Over Compliance of the security-based swap
dealer was effective as of the end of the most recent fiscal year;
    (4) The security-based swap dealer was in compliance with
Sec. Sec.  240.18a-1 and 240.18a-4(c) as of the end of the most recent
fiscal year; and
    (5) The information the security-based swap dealer used to state
whether it was in compliance with Sec. Sec.  240.18a-1 and 240.18a-4(c)
was derived from the books and records of the security-based swap
dealer.
    (B) If applicable, a description of each identified material
weakness in the Internal Control Over Compliance of the security-based
swap dealer during the most recent fiscal year.
    (C) If applicable, a description of an instance of non-compliance
with Sec.  240.18a-1 or Sec.  240.18a-4(c) as of the end of the most
recent fiscal year.
    (ii) The term Internal Control Over Compliance means internal
controls that have the objective of providing the security-based swap
dealer with reasonable assurance that non-compliance with Sec.
240.18a-1, Sec.  240.18a-4(c), Sec.  240.18a-9, or Sec.  240.17a-13, as
applicable, will be prevented or detected on a timely basis.
    (iii) The security-based swap dealer is not permitted to conclude
that its Internal Control Over Compliance was effective during the most
recent fiscal year if there were one or more material weaknesses in its
Internal Control Over Compliance during the most recent fiscal year.
The security-based swap dealer is not permitted to conclude that its
Internal Control Over Compliance was effective as of the end of the
most recent fiscal year if there were one or more material weaknesses
in its internal control as of the end of the most recent fiscal year. A
material weakness is a deficiency, or a combination of deficiencies, in
Internal Control Over Compliance such that there is a reasonable
possibility that non-compliance with Sec.  240.18a-1 or Sec.  240.18a-
4(c) will not be prevented, or detected on a timely basis or that non-
compliance to a material extent with Sec.  240.18a-4, except for
paragraph (c), or Sec.  240.18a-9 or Sec.  240.17a-13, as applicable,
will not be prevented or detected on a timely basis. A deficiency in
Internal Control Over Compliance exists when the design or operation of
a control does not allow the management or employees of the security-
based swap dealer in the normal course of performing their assigned
functions, to prevent or detect on a timely basis non-compliance with
Sec.  240.18a-1, Sec.  240.18a-4, Sec.  240.18a-9, or Sec.  240.17a-13,
as applicable.
    (4) Exemption report. The exemption report must contain the
following statements made to the best knowledge and belief of the
security-based swap dealer:
    (i) A statement that the security-based swap dealer met the
exemption provisions in Sec.  240.18a-4(f) throughout the most recent
fiscal year without exception or that it met the exemption provisions
in Sec.  240.18a-4(f) throughout the most recent fiscal year except as
described under paragraph (c)(4)(ii) of this section; and
    (ii) If applicable, a statement that identifies each exception
during the most recent fiscal year in meeting the exemption provisions
in Sec.  240.18a-4(f) and that briefly describes the nature of each
exception and the approximate date(s) on which the exception existed.
    (5) Timing of filing. The annual reports must be filed not more
than sixty (60) calendar days after the end of the fiscal year of the
security-based swap dealer or major security-based swap participant.
    (6) Location of filing. The annual reports must be filed with the
Commission at the regional office of the Commission for the region in
which the security-based swap dealer or major security-based swap
participant has its principal place of business and the Commission's
principal office in Washington, DC, or the annual reports may be filed
with the Commission electronically in accordance with directions
provided on the Commission's website.
    (d) Nature and form of reports. The annual reports filed pursuant
to paragraph (c) of this section must be prepared and filed in
accordance with the following requirements:
    (1)(i) The security-based swap dealer or major security-based swap
participant must attach to each of the confidential and non-
confidential portions of the annual reports separately bound under
paragraph (d)(2) of this section a complete and executed Part III of
Form X-17A-5 (Sec.  249.617 of this chapter). The security-based swap
dealer or major security-based swap participant must attach to the
financial report an oath or affirmation that, to the best knowledge and
belief of the person making the oath or affirmation:
    (A) The financial report is true and correct; and
    (B) Neither the registrant, nor any partner, officer, director, or
equivalent person, as the case may be, has any proprietary interest in
any account classified solely as that of a customer.
    (ii) The oath or affirmation must be made before a person duly
authorized to administer such oaths or affirmations. If the security-
based swap dealer or major security-based swap participant is a sole
proprietorship, the oath or affirmation must be made by the proprietor;
if a partnership, by a general partner; if a corporation, by a duly
authorized officer; or if a limited liability company or limited
liability partnership, by the chief executive officer, chief financial
officer, manager, managing member, or those members vested with
management authority for the limited liability company or limited
liability partnership.

    (2) The annual reports filed under paragraph (c) of this section
are not confidential, except that, if the Statement of Financial
Condition is in a format that is consistent with Part II of Form X-17A-
5 (Sec.  249.617 of this chapter), and is bound separately from the
balance of the annual reports filed under paragraph (c) of this
section, and each page of the balance of the annual report is stamped
``confidential,'' then the balance of the annual reports will be deemed
confidential to the extent permitted by law. However, the annual
reports, including the confidential portions, will be available for
official use by any official or employee of the U.S. or any State, and
by any other person if the Commission authorizes disclosure of the
annual reports to that person as being in the public interest. Nothing
contained in this paragraph (d)(2) may be construed to be in derogation
of the right of customers of a security-based swap dealer or major
security-based swap participant, upon request to the security-based
swap dealer or major security-based swap participant, to obtain
information relative to its financial condition.
    (e) Independent public accountant--(1) Qualifications of
independent public accountant. The independent public accountant must
be qualified and independent in accordance with Sec.  210.2-01 of this
chapter.
    (2) Statement regarding independent public accountant. (i) Every
security-based swap dealer or major security-based swap participant
that is required to file annual reports under paragraph (c) of this
section must file no later than December 10 of each year (or 30 days
after effective date of its registration as a security-based swap
dealer or major security-based swap participant if earlier) a statement
as prescribed in paragraph (e)(2)(ii) of this section with the
Commission's principal office in Washington, DC and the regional office
of the Commission for the region in which its principal place of
business is located. The statement must be dated no later than December
1 (or 20 calendar days after the effective date of its registration as
a security-based swap dealer or major security-based swap participant,
if earlier). If the engagement of an independent public accountant is
of a continuing nature, providing for successive engagements, no
further filing is required. If the engagement is for a single year, or
if the most recent engagement has been terminated or amended, a new
statement must be filed by the required date.
    (ii) The statement must be headed ``Statement regarding independent
public accountant under Rule 18a-7(e)(2)'' and must contain the
following information and representations:
    (A) Name, address, telephone number and registration number of the
security-based swap dealer or major security-based swap participant.
    (B) Name, address, and telephone number of the independent public
accountant.
    (C) The date of the fiscal year of the annual reports of the
security-based swap dealer or major security-based swap participant
covered by the engagement.
    (D) Whether the engagement is for a single year or is of a
continuing nature.
    (E) A representation that the independent public accountant has
undertaken the items enumerated in paragraphs (f)(1) and (2) of this
section.
    (3) Replacement of accountant. A security-based swap dealer or
major security-based swap participant must file a notice that must be
received by the Commission's principal office in Washington, DC and the
regional office of the Commission for the region in which its principal
place of business is located not more than 15 business days after:
    (i) The security-based swap dealer or major security-based swap
participant has notified the independent public accountant that
provided the reports the security-based swap dealer or major security-
based swap participant filed under paragraph (c)(1)(i)(C) of this
section for the most recent fiscal year that the independent public
accountant's services will not be used in future engagements; or
    (ii) The security-based swap dealer or major security-based swap
participant has notified an independent public accountant that was
engaged to provide the reports required under paragraph (c)(1)(i)(C) of
this section that the engagement has been terminated; or
    (iii) An independent public accountant has notified the security-
based swap dealer or major security-based swap participant that the
independent public accountant would not continue under an engagement to
provide the reports required under paragraph (c)(1)(i)(C) of this
section; or
    (iv) A new independent public accountant has been engaged to
provide the reports required under paragraph (c)(1)(i)(C) of this
section without any notice of termination having been given to or by
the previously engaged independent public accountant.
    (v) The notice must include:
    (A) The date of notification of the termination of the engagement
or of the engagement of the new independent public accountant, as
applicable; and
    (B) The details of any issues arising during the 24 months (or the
period of the engagement, if less than 24 months) preceding the
termination or new engagement relating to any matter of accounting
principles or practices, financial statement disclosure, auditing scope
or procedure, or compliance with applicable rules of the Commission,
which issues, if not resolved to the satisfaction of the former
independent public accountant, would have caused the independent public
accountant to make reference to them in the report of the independent
public accountant. The issues required to be reported include both
those resolved to the former independent public accountant's
satisfaction and those not resolved to the former accountant's
satisfaction. Issues contemplated by this section are those which occur
at the decision-making level--that is, between principal financial
officers of the security-based swap dealer or major security-based swap
participant and personnel of the accounting firm responsible for
rendering its report. The notice must also state whether the
accountant's report filed under paragraph (c)(1)(i)(C) of this section
for any of the past two fiscal years contained an adverse opinion or a
disclaimer of opinion or was qualified as to uncertainties, audit
scope, or accounting principles, and must describe the nature of each
such adverse opinion, disclaimer of opinion, or qualification. The
security-based swap dealer or major security-based swap participant
must also request the former independent public accountant to furnish
the security-based swap dealer or major security-based swap participant
with a letter addressed to the Commission stating whether the
independent public accountant agrees with the statements contained in
the notice of the security-based swap dealer or major security-based
swap participant and, if not, stating the respects in which the
independent public accountant does not agree. The security-based swap
dealer or major security-based swap participant must file three copies
of the notice and the accountant's letter, one copy of which must be
manually signed by the sole proprietor, or a general partner or a duly
authorized corporate, limited liability company, or limited liability
partnership officer or member, as appropriate, and by the independent
public accountant, respectively.
    (f) Engagement of the independent public accountant. The
independent public accountant engaged by the security-based swap dealer
or major security-based swap participant to

provide the reports required under paragraph (c)(1)(i)(C) of this
section must, as part of the engagement, undertake the following, as
applicable:
    (1) To prepare an independent public accountant's report based on
an examination of the financial report required to be filed by the
security-based swap dealer or major security-based swap participant
under paragraph (c)(1)(i)(A) of this section in accordance with
generally accepted auditing standards in the United States or the
standards of the Public Company Accounting Oversight Board; and
    (2)(i) To prepare an independent public accountant's report based
on an examination of the statements required under paragraphs
(c)(3)(i)(A)(2) through (5) of this section in the compliance report
required to be filed by the security-based swap dealer under paragraph
(c)(1)(i)(B)(1) of this section in accordance with generally accepted
auditing standards in the United States or the standards of the Public
Company Accounting Oversight Board; or
    (ii) To prepare an independent public accountant's report based on
a review of the statements required under paragraphs (c)(4)(i) through
(ii) of this section in the exemption report required to be filed by
the security-based swap dealer under paragraph (c)(1)(i)(B)(2) of this
section in accordance with generally accepted auditing standards in the
United States or the standards of the Public Company Accounting
Oversight Board.
    (g) Notification of non-compliance or material weakness. If, during
the course of preparing the independent public accountant's reports
required under paragraph (c)(1)(i)(C) of this section, the independent
public accountant determines that:
    (1) A security-based swap dealer is not in compliance with Sec.
240.18a-1, Sec.  240.18a-4, Sec.  240.18a-9, or Sec.  240.17a-13, as
applicable, or the independent public accountant determines that any
material weaknesses (as defined in paragraph (c)(3)(iii) of this
section) exist, the independent public accountant must immediately
notify the chief financial officer of the security-based swap dealer of
the nature of the non-compliance or material weakness. If the notice
from the accountant concerns an instance of non-compliance that would
require a security-based swap dealer to provide a notification under
Sec.  240.18a-8, or if the notice concerns a material weakness, the
security-based swap dealer must provide a notification in accordance
with Sec.  240.18a-8, as applicable, and provide a copy of the
notification to the independent public accountant. If the independent
public accountant does not receive the notification within one business
day, or if the independent public accountant does not agree with the
statements in the notification, then the independent public accountant
must notify the Commission within one business day. The report from the
accountant must, if the security-based swap dealer failed to file a
notification, describe any instances of non-compliance that required a
notification under Sec.  240.18a-8 or any material weakness. If the
security-based swap dealer filed a notification, the report from the
accountant must detail the aspects of the notification of the security-
based swap dealer with which the accountant does not agree; or
    (2) A major security-based swap participant is not in compliance
with Sec.  240.18a-2, the independent public accountant must
immediately notify the chief financial officer of the major security-
based swap participant of the nature of the non-compliance. If the
notice from the accountant concerns an instance of non-compliance that
would require a major security-based swap participant to provide a
notification under Sec.  240.18a-8, the major security-based swap
participant must provide a notification in accordance with Sec.
240.18a-8 and provide a copy of the notification to the independent
public accountant. If the independent public accountant does not
receive the notification within one business day, or if the independent
public accountant does not agree with the statements in the
notification, then the independent public accountant must notify the
Commission within one business day. The report from the accountant
must, if the major security-based swap participant failed to file a
notification, describe any instances of non-compliance that required a
notification under Sec.  240.18a-8. If the major security-based swap
participant filed a notification, the report from the accountant must
detail the aspects of the notification of the major security-based swap
participant with which the accountant does not agree.

    Note 1 to paragraph (g): The attention of the security-based
swap dealer, major security-based swap participant, and the
independent public accountant is called to the fact that under Sec.
240.18a-8(a), among other things, a security-based swap dealer or
major security-based swap participant whose net capital or tangible
net worth, as applicable, declines below the minimum required
pursuant to Sec.  240.18a-1 or Sec.  240.18a-2, as applicable, must
give notice of such deficiency that same day in accordance with
Sec.  240.18a-8(h) and the notice must specify the security-based
swap dealer's net capital requirement and its current amount of net
capital, or the extent of the major security-based swap
participant's failure to maintain positive tangible net worth, as
applicable.

    (h) Reports of the independent public accountant required under
paragraph (c)(1)(i)(C) of this section--(1) Technical requirements. The
independent public accountant's reports must:
    (i) Be dated;
    (ii) Be signed manually;
    (iii) Indicate the city and state where issued; and
    (iv) Identify without detailed enumeration the items covered by the
reports.
    (2) Representations. The independent public accountant's reports
must:
    (i) State whether the examinations were made in accordance with
generally accepted auditing standards in the United States or the
standards of the Public Company Accounting Oversight Board; and
    (ii) Identify any examination procedures deemed necessary by the
independent public accountant under the circumstances of the particular
case which have been omitted and the reason for their omission.
    (iii) Nothing in this section may be construed to imply authority
for the omission of any procedure that independent public accountants
would ordinarily employ in the course of an examination for the purpose
of expressing the opinions required under this section.
    (3) Opinion to be expressed. The independent public accountant's
reports must state clearly:
    (i) The opinion of the independent public accountant with respect
to the financial report required under paragraph (c)(1)(i)(C) of this
section and the accounting principles and practices reflected in that
report;
    (ii) The opinion of the independent public accountant with respect
to the financial report required under paragraph (c)(1)(i)(C) of this
section, as to the consistency of the application of the accounting
principles, or as to any changes in those principles which have a
material effect on the financial statements; and
    (iii)(A) The opinion of the independent public accountant with
respect to the statements required under paragraphs (c)(3)(i)(A)(2)
through (5) of this section in the compliance report required under
paragraph (c)(1)(i)(B)(1) of this section; or
    (B) The conclusion of the independent public accountant with
respect to the statements required under paragraphs (c)(4)(i) and (ii)
of this section in the exemption report required

under paragraph (c)(1)(i)(B)(2) of this section.
    (4) Exceptions. Any matters to which the independent public
accountant takes exception must be clearly identified, the exceptions
must be specifically and clearly stated, and, to the extent
practicable, the effect of each such exception on any related items
contained in the annual reports required under paragraph (c) of this
section must be given.
    (i) Notification of change of fiscal year. (1) In the event any
security-based swap dealer or major security-based swap participant for
which there is no prudential regulator finds it necessary to change its
fiscal year, it must file, with the Commission's principal office in
Washington, DC and the regional office of the Commission for the region
in which the security-based swap dealer or major security-based swap
participant has its principal place of business, a notice of such
change.
    (2) Such notice must contain a detailed explanation of the reasons
for the change. Any change in the filing period for the annual reports
must be approved by the Commission.
    (j) Filing requirements. For purposes of filing requirements as
described in this section, filing will be deemed to have been
accomplished upon receipt at the Commission's principal office in
Washington, DC, with duplicate originals simultaneously filed at the
locations prescribed in the particular paragraph of this section which
is applicable.

0
14. Section 240.18a-8 is added to read as follows:

Sec.  240.18a-8   Notification provisions for security-based swap
dealers and major security-based swap participants.

    This section applies to the following types of entities: A
security-based swap dealer registered pursuant to section 15F of the
Act (15 U.S.C. 78o-10) that is not also a broker or dealer, other than
an OTC derivatives dealer as that term is defined in Sec.  240.3b-12,
registered pursuant to section 15 of the Act (15 U.S.C. 78o); a
security-based swap dealer registered pursuant to section 15F of the
Act that is also an OTC derivatives dealer; and a major security-based
swap participant registered pursuant to section 15F of the Act that is
not also a broker or dealer, including an OTC derivatives dealer,
registered pursuant to section 15 of the Act. Section 240.17a-11
(rather than this section) applies to the following types of entities:
Except as provided above, a broker or dealer, including an OTC
derivatives dealer, registered pursuant to section 15 of the Act; a
broker or dealer, other than an OTC derivatives dealer, registered
pursuant to section 15 of the Act that is also a security-based swap
dealer registered pursuant to section 15F of the Act; and a broker or
dealer, including an OTC derivatives dealer, registered pursuant to
section 15 of the Act that is also a major-security-based swap
participant registered pursuant to section 15F of the Act.
    (a)(1)(i) Every security-based swap dealer for which there is no
prudential regulator whose net capital declines below the minimum
amount required pursuant to Sec.  240.18a-1 must give notice of such
deficiency that same day in accordance with paragraph (h) of this
section. The notice must specify the security-based swap dealer's net
capital requirement and its current amount of net capital. If a
security-based swap dealer is informed by the Commission that it is, or
has been, in violation of Sec.  240.18a-1 and the security-based swap
dealer has not given notice of the capital deficiency under this
section, the security-based swap dealer, even if it does not agree that
it is, or has been, in violation of Sec.  240.18a-1, must give notice
of the claimed deficiency, which notice may specify the security-based
swap dealer's reasons for its disagreement.
    (ii) Every security-based swap dealer for which there is no
prudential regulator whose tentative net capital declines below the
minimum amount required pursuant to Sec.  240.18a-1 must give notice of
such deficiency that same day in accordance with paragraph (h) of this
section. The notice must specify the security-based swap dealer's
tentative net capital requirement and its current amount of tentative
net capital. If a security-based swap is informed by the Commission
that it is, or has been, in violation of Sec.  240.18a-1 and the
security-based swap dealer has not given notice of the capital
deficiency under this section, the security-based swap dealer, even if
it does not agree that it is, or has been, in violation of Sec.
240.18a-1, must give notice of the claimed deficiency, which notice may
specify the security-based swap dealer's reasons for its disagreement.
    (2) Every major security-based swap participant for which there is
no prudential regulator who fails to maintain a positive tangible net
worth pursuant to Sec.  240.18a-2 must give notice of such deficiency
that same day in accordance with paragraph (h) of this section. The
notice must specify the extent to which the firm has failed to maintain
positive tangible net worth. If a major security-based swap participant
is informed by the Commission that it is, or has been, in violation of
Sec.  240.18a-2 and the major security-based swap participant has not
given notice of the capital deficiency under this section, the major
security-based swap participant, even if it does not agree that it is,
or has been, in violation of Sec.  240.18a-2, must give notice of the
claimed deficiency, which notice may specify the major security-based
swap participant's reasons for its disagreement.
    (b) Every security-based swap dealer or major security-based swap
participant for which there is no prudential regulator must send notice
promptly (but within 24 hours) after the occurrence of the events
specified in paragraphs (b)(1) through (3) or paragraph (b)(4) of this
section, as applicable, in accordance with paragraph (h) of this
section:
    (1) If a computation made by a security-based swap dealer pursuant
to Sec.  240.18a-1 shows that its total net capital is less than 120
percent of the security-based swap dealer's required minimum net
capital;
    (2) If a computation made by a security-based swap dealer
authorized by the Commission to compute net capital pursuant to Sec.