SEC Issues Guidance on Substituted Compliance Applications by Non-US Security-Based Swap Dealers and Major Security-Based Swap Participants
On November 25, the Securities and Exchange Commission’s Division of Trading and Markets issued guidance intended to facilitate certain substituted compliance applications submitted by non-US security-based swap dealers and/or major security-based swap participants (Guidance).
The Guidance is intended to help persons submitting applications in accordance with Rule 3a71-6 under the Securities Exchange Act of 1934 by posing relevant questions regarding the relevant foreign requirements in comparison with the SEC’s requirements and describing the relevant SEC requirements in detail.
The SEC provided information on five categories of requirements that will be applicable to security-based swap dealers and/or major security-based swap participants. These categories relate to 1) risk controls (including risk controls related to capital, margin, risk management systems and trade acknowledgment and verification); 2) recordkeeping and reporting requirements (including requirements related to record creation, record maintenance, and reporting/notice); 3) internal supervision and compliance requirements (including requirements related to supervision, conflicts of interest, and chief compliance officers); 4) counterparty protections (including protections related to fair and balanced communications, the disclosure of certain risks, characteristics, incentives and conflicts, daily mark disclosure, “know your counterparty,” recommendation suitability, and the disclosure of clearing rights); and 5) any other relevant requirements (including requirements related to the eligible contract participant verification process and special entities and political contributions).
The text of the Guidance is available here.