Notice2021-22817
Order Specifying the Manner and Format of Filing Unaudited Financial and Operational Information by Security-Based Swap Dealers and Major Security-Based Swap Participants That Are Not U.S. Persons and Are Relying on Substituted Compliance Determinations With Respect to Rule 18a-7
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
October 26, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 204 (Tuesday, October 26, 2021)</title>
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[Federal Register Volume 86, Number 204 (Tuesday, October 26, 2021)]
[Notices]
[Pages 59208-59258]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-22817]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93335]
Order Specifying the Manner and Format of Filing Unaudited
Financial and Operational Information by Security-Based Swap Dealers
and Major Security-Based Swap Participants That Are Not U.S. Persons
and Are Relying on Substituted Compliance Determinations With Respect
to Rule 18a-7
I. Introduction
Currently, broker-dealers are required to file on a monthly or
quarterly basis the applicable part of Form X-17A-5 (``FOCUS
Report'').\1\ Broker-dealers use the FOCUS Report to submit unaudited
financial and operational information that is used by the Commission
and broker-dealer self-regulatory organizations to monitor and
supervise the firms. On September 19, 2019, the U.S. Securities and
Exchange Commission (``Commission'') adopted recordkeeping, reporting,
and notification requirements applicable to registered security-based
swap dealers and major security-based swap participants (collectively,
``SBS Entities'') and additional recordkeeping and reporting
requirements for broker-dealers to account for their security-based
swap activities.\2\ As part of this initiative, the Commission adopted
Exchange Act rule 18a-7 (``Rule 18a-7''), amended Part II of the FOCUS
Report, and adopted a new Part IIC of the FOCUS Report.\3\ Rule 18a-7
applies to SBS Entities that also are registered with the Commission as
OTC derivatives dealers (a special purpose broker-dealer that must
limit its business to dealing in over-the-counter derivatives) or that
do not have a broker-dealer registration.\4\ Under this rule, SBS
Entities that do not have a prudential regulator are required to file
Part II of the FOCUS Report on a monthly basis and SBS Entities that
have a prudential regulator are required to file Part IIC of the FOCUS
Report on a quarterly basis.\5\ Rule 18a-7 requires SBS Entities to
file Part II or Part IIC of the FOCUS Report with the Commission or its
designee.\6\ The Commission has designated the Financial Industry
Regulatory Association, Inc. (``FINRA'') as the organization with which
SBS Entities must file Part II or Part IIC of the FOCUS Report.\7\
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\1\ See 17 CFR 240.17a-5(a).
\2\ See Recordkeeping and Reporting Requirements for Security-
Based Swap Dealers, Major Security-Based Swap Participants, and
Broker-Dealers, Securities Exchange Act of 1934 (``Exchange Act'')
Release No. 87005 (Sept. 19, 2019), 84 FR 68550 (Dec. 16, 2019)
(``Recordkeeping and Reporting Adopting Release'').
\3\ Id. at 68571-88. See also 17 CFR 240.18a-7. The amendments
to Part II included consolidating other FOCUS Report parts into Part
II. See Recordkeeping and Reporting Adopting Release, 84 FR at
68573-74 (discussing the consolidation of Parts IIB and IICSE into
Part II).
\4\ SBS Entities that also are registered as broker-dealers
(other than OTC derivatives dealers) are subject to the FOCUS Report
filing requirements of Exchange Act rule 17a-5. 17 CFR 240.17a-5(a).
\5\ See 17 CFR 240.18a-7(a)(1) and (2).
\6\ See 17 CFR 240.18a-7(a).
\7\ See Order Designating Financial Industry Regulatory
Authority, Inc., to Receive Form X-17A-5 (FOCUS Report) from Certain
Security-Based Swap Dealers and Major Security-Based Swap
Participants, Exchange Release No. 34-88866 (May 14, 2020).
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Exchange Act rule 3a71-6 (``Rule 3a71-6'') conditionally provides
that SBS Entities that are not U.S. persons may satisfy certain
requirements under Exchange Act section 15F, including Rule 18a-7, by
complying with comparable regulatory requirements of the SBS Entity's
home jurisdiction.\8\ Pursuant to Rule 3a71-6, the Commission has
issued orders granting conditional substituted compliance with respect
to certain requirements applicable to SBS Entities subject to
regulation in France, Germany, and the United Kingdom (``substituted
compliance orders'').\9\ The substituted compliance orders permit
certain SBS Entities in those jurisdictions (``Covered Entities'') to
apply substituted compliance for specified Exchange Act requirements.
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\8\ See 17 CFR 240.3a71-6.
\9\ See Order Granting Conditional Substituted Compliance in
Connection with Certain Requirements Applicable to Non-U.S.
Security-Based Swap Dealers and Major Security-Based Swap
Participants Subject to Regulation in the Federal Republic of
Germany, Exchange Act Release No. 90765 (Dec. 22, 2020), 85 FR 85686
(Dec. 29, 2020); Order Granting Conditional Substituted Compliance
in Connection with Certain Requirements Applicable to Non-U.S.
Security-Based Swap Dealers and Major Security-Based Swap
Participants Subject to Regulation in the French Republic, Exchange
Act Release No. 92484 (July 23, 2021), 86 FR 41612 (Aug. 2, 2021);
Order Granting Conditional Substituted Compliance in Connection with
Certain Requirements Applicable to Non-U.S. Security-Based Swap
Dealers and Major Security-Based Swap Participants Subject to
Regulation in the United Kingdom, Exchange Release No. 92529 (June
30, 2021), 86 FR 43318 (Aug. 6, 2021); Order Granting Conditional
Substituted Compliance in Connection With Certain Requirements
Applicable to Non-U.S. Security-Based Swap Dealers Subject to
Regulation in the Swiss Confederation, Exchange Act Release No.
93284 (Oct. 8, 2021).
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The substituted compliance orders permit a Covered Entity to
satisfy the requirements of Rule 18a-7 with respect to filing Part II
or Part IIC of the FOCUS Report by being subject to and complying with
specified requirements in the Covered Entity's home jurisdiction,
subject to additional conditions designed to help ensure comparability
of regulatory outcomes. In particular, the conditions for applying
substituted compliance with respect to Rule 18a-7 are that the Covered
Entity: (1) Is subject to and complies with the relevant comparable
requirements of the home jurisdiction; (2) files periodic unaudited
financial and operational information with the Commission or its
designee in the manner and format required by Commission rule or order
and presents the financial information in the filing in accordance with
generally accepted accounting principles (``GAAP'') that the Covered
Entity uses to prepare general purpose publicly available or available
to be issued financial statements in the home jurisdiction (``manner
and format condition''); (3) applies substituted compliance for the
capital requirements of Exchange Act rules 18a-1 through 18a-1d
(collectively, ``Rule 18a-1'') if the Covered Entity does not have a
prudential regulator; \10\ and (4) applies substituted compliance for
the record preservation requirements of Exchange Act rule 18a-
6(b)(1)(viii) (``Rule 18a-6(b)(1)(viii)'') if the Covered Entity does
not have a prudential regulator.\11\
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\10\ See 17 CFR 240.18a-1 through 18a-1d.
\11\ See 17 CFR 240.18a-6(b)(1)(viii). Rule 18a-6(b)(1)(viii)
requires SBS Entities without a prudential regulator to preserve
specified information in support of amounts included in the FOCUS
Report Part II prepared as of the audit date. Id.
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This order specifies how a Covered Entity must meet the manner and
format condition in a substituted compliance order.\12\ Finally, in
response to the Commission's proposed substituted compliance orders
with respect to Germany, France, and the United Kingdom, commenters
made suggestions about the manner and
[[Page 59209]]
format condition.\13\ The comments, and the Commission's response to
them, are discussed below.
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\12\ This order applies to the manner and format condition in
the existing substituted compliance orders and to any future orders
that include the manner and format condition. If necessary to
achieve comparable regulatory outcomes, the Commission may prescribe
additional conditions in a future substituted compliance order with
respect to a particular jurisdiction to tailor a Covered Entity's
reliance on the manner and format condition to the relevant laws in
the jurisdiction.
\13\ The comments are available at: <a href="https://www.sec.gov/comments/s7-16-20/s71620.htm">https://www.sec.gov/comments/s7-16-20/s71620.htm</a> (Germany); <a href="https://www.sec.gov/comments/s7-22-20/s72220.htm">https://www.sec.gov/comments/s7-22-20/s72220.htm</a> (France); and <a href="https://www.sec.gov/comments/s7-04-21/s70421.htm">https://www.sec.gov/comments/s7-04-21/s70421.htm</a> (United Kingdom).
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II. Discussion
A. Manner of Filing
i. Use Part II or IIC of the FOCUS Report and the eFOCUS System
Administered by FINRA
Most broker-dealers registered with the Commission currently file
the applicable part of the FOCUS Report with FINRA through the eFOCUS
system (``FINRA eFOCUS system''). As noted above, the Commission has
designated FINRA to receive Part II and Part IIC of the FOCUS Report
filed by SBS Entities pursuant to Rule 18a-7, including SBS Entities
that are not broker-dealer members of FINRA. FINRA will administer a
separate eFOCUS system to be used by SBS Entities that are not broker-
dealer members of FINRA to file the FOCUS Report Part II and Part IIC
(as applicable) (``SEC eFOCUS system''). Under this order, a Covered
Entity must file the financial and operational information in the
format discussed below with the Commission through the SEC eFOCUS
system administered by FINRA.\14\ The SEC eFOCUS system is modelled
closely on the FINRA eFOCUS system. Using the SEC eFOCUS system will
enable Covered Entities applying substituted compliance with respect to
Rule 18a-7 to file the FOCUS Report Part II and Part IIC (as
applicable) on the same platform and to use the same preexisting
templates, software, and procedures as SBS Entities that are not
members of FINRA. Further, the Commission staff will have access to the
SEC eFOCUS system and the FINRA eFOCUS system (collectively, the
``eFOCUS systems'') and information filed on those systems will be
provided to the Commission staff to maintain a separate database. The
staff will use its access to the eFOCUS systems and the database to
monitor the financial condition of firms and to perform cross-firm
analysis to identify trends and areas meriting further regulatory focus
as well as to perform economic analyses. Requiring Covered Entities to
use the SEC eFOCUS system to file the required financial and
operational information will facilitate integrating the information
with the financial and operational information of broker-dealers (some
of which will be registered as security-based swap dealers) and SBS
Entities that are not applying substituted compliance with respect to
Rule 18a-7. This will enhance the Commission's ability to monitor and
supervise these firms.
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\14\ See paragraph (a) of the ordering language below. Covered
Entities may file the FOCUS Reports Part II and Part IIC (as
applicable) pursuant to instructions on the Commission's website if
the SEC eFOCUS system is not ready to receive them by the required
first filing deadline and, thereafter, until the SEC eFOCUS system
is ready to receive the FOCUS Reports.
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ii. Frequency and Timing of Filing
Rule 18a-7 requires an SBS Entity that is not prudentially
regulated to file Part II of the FOCUS Report seventeen business days
after the month end and an SBS Entity that is prudentially regulated to
file Part IIC of the FOCUS Report thirty calendar days after the
quarter end.\15\ In response to proposed substituted compliance orders,
the Commission received comments requesting that Covered Entities be
permitted to file their financial and operational information with the
same frequency that they file financial reports in their home
jurisdictions (typically quarterly).\16\ A commenter further requested
that the deadline for filing the financial and operational information
with the Commission be extended to 14 calendar days after the filing in
their home jurisdiction is due, except the commenter requested 30
calendar days in the case of a filing that covers a period ending on
the firm's fiscal year end.\17\
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\15\ See 17 CFR 240.18a-7(a)(1) and (2).
\16\ See, e.g., Letter from Kyle Brandon, Managing Director,
Head of Derivative Policy, SIFMA (Dec. 8, 2020) (``SIFMA Letter re:
Proposed Order (Germany)'') at 8; Letter from Jan Ford, Head of
Compliance, Americas and Co-Head of SBS Council, Deutsche Bank, and
Gary Kane, Co-Head Institutional Client Group, Americas and Co-Head
of SBS Council, Deutsche Bank (Dec. 8, 2020) (``Deutsche Bank Letter
re: Proposed Order (Germany)'') at 2; Letter from Kyle Brandon,
Managing Director, Head of Derivative Policy, SIFMA (Jan. 25, 2021)
(``SIFMA Letter re: Proposed Order (France)'') at 16; Letter from
Kyle L. Brandon, Managing Director, Head of Derivatives Policy,
SIFMA (May 3, 2021) (``SIFMA Letter re: Proposed Order (UK)'') at
Appendix B.
\17\ SIFMA Letter re: Proposed Order (UK) at Appendix B.
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The commenter's requests would substantially delay (in some cases
by multiple months) the reporting of financial and operational
information by Covered Entities. Consequently, for the reasons
discussed below, the Commission does not believe it would be
appropriate to permit the extended timeframes for reporting this
information requested by the commenter. The Commission--when amending
Rule 3a71-6 to make substituted compliance available for Rule 18a-7--
explained the importance of reporting.\18\ In particular, the reporting
requirements are integral to the ability of the Commission to
effectively examine and inspect regulated firms' compliance with
applicable securities laws.\19\ Further, the reports are used to
determine which firms are engaged in various securities-related
activities, and how economic events and government policies may affect
segments of the securities industry.\20\ In addition, the reports are
important for protecting customers against the risks involved in having
their securities held by a third party.\21\ Finally, the reporting
requirements promote transparency of the financial and operational
condition of firms registered with the Commission.\22\ In light of
these considerations, Rule 3a71-6 states, in pertinent part, that prior
to making a substituted compliance determination regarding SBS Entity
reporting requirements, the Commission intends to consider (in addition
to any conditions imposed) whether the foreign financial regulatory
system's required reports, the timeframes for reporting information,
the accounting standards governing the reports, and the required format
of the reports are comparable to applicable provisions arising under
the Exchange Act and its rules and regulations and would permit the
Commission to examine and inspect regulated firms' compliance with
applicable securities laws.\23\
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\18\ See Recordkeeping and Reporting Adopting Release, 84 FR at
68598.
\19\ Id.
\20\ Id.
\21\ Id.
\22\ Id.
\23\ See 17 CFR 240.3a71-6; Recordkeeping and Reporting Adopting
Release, 84 FR at 68598.
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Rule 18a-7 requires SBS Entities without a prudential regulator to
file the FOCUS Report Part II on a monthly basis 17 business days after
the end of the month. As stated above, the commenter requests that
Covered Entities without a prudential regulator be permitted to file
the financial and operational information on a quarterly basis (if that
is the filing frequency in their home jurisdiction) and 14 or 30 days
after the deadlines for filing information in their home jurisdiction.
Permitting quarterly filing and tying the deadline to local
requirements would significantly delay the Commission's receipt of the
financial and operational information and result in the filing of
information that is multiple months old. Therefore, for the reasons
discussed above, the Commission does not believe it would be
appropriate to permit the timeframes requested by the commenter.
[[Page 59210]]
However, the Commission does believe it would be appropriate to permit
the filing deadline to be 35 calendar days after the month end. This
would align with the 35-day filing deadline for Covered Entities with a
prudential regulator (discussed below).
Rule 18a-7 requires SBS Entities with a prudential regulator to
file the FOCUS Report Part IIC 30 calendar days after the end of the
quarter. The commenter requests that Covered Entities with a prudential
regulator be permitted to file the financial and operational
information 14 or 30 days after the deadlines for filing information in
their home jurisdiction. As discussed above, tying the deadline to
local requirements would significantly delay the Commission's receipt
of the financial and operational information and result in the filing
of information that is several months old. Therefore, for the reasons
discussed above, the Commission does not believe it would be
appropriate to permit the timeframes requested by the commenter.
However, the Commission believes it would be appropriate to permit the
filing deadline to be 35 days after the quarter end. The Commission
understands that the U.S. prudential regulators permit certain U.S.
banks to file their financial reports 35 days after the quarter end.
The Commission does not believe this modest increase in the number of
days Covered Entities have to file the FOCUS Report Part II or Part IIC
would implicate the concerns discussed above about receiving stale
information.
Under the order, a Covered Entity without a prudential regulatory
must file the FOCUS Report Part II 35 calendar days after the end of
the month.\24\ A Covered Entity with a prudential regulator must file
the FOCUS Report Part IIC 35 calendar days after the end of the
quarter. \25\
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\24\ See paragraph (a)(1) of the ordering language below.
\25\ See paragraph (a)(2) of the ordering language below.
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B. Format of Filing
i. Complete a Specified Set of Line Items on the FOCUS Report
Part II and Part IIC of the FOCUS Report elicit financial and
operational information about the filer through sections consisting of
uniquely numbered line items. The information (e.g., a number or dollar
amount) is entered into the line items. Under Rule 18a-7, an SBS Entity
must use Part II or Part IIC of the FOCUS Report to submit required
financial and operational information by filling out all applicable
line items on the form. Commenters requested that Covered Entities be
allowed to file other reports instead of or in combination with
extracts from filings made with home country supervisors in lieu of
filing the information elicited in Part II or Part IIC of the FOCUS
Report.\26\
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\26\ See SIFMA Letter re: Proposed Order (Germany) at 8;
Deutsche Bank Letter re: Proposed Order (Germany) at 2; SIFMA Letter
re: Proposed Order (France) at 15.
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As discussed above, the Commission's ability to monitor and
supervise SBS Entities will be facilitated by having all firms file
periodic unaudited financial and operational information through the
eFOCUS systems. The eFOCUS systems are configured to receive
information formatted to Part II and Part IIC of the FOCUS Report and
the line items contained on the forms. Consequently, information
formatted to other types of report templates or free-form information
cannot be input into the systems. Moreover, having all firms enter
information in the uniquely numbered line items on Part II or Part IIC
of the FOCUS Report will facilitate cross firm comparisons. If firms
use different forms or report information without using the template of
a common form, the Commission staff would need to manually merge the
data, and even then, there would be omissions when the other form does
not have a parallel line item.
However, the Commission sought comment in the proposed substituted
compliance orders for Germany, France, and the United Kingdom on
whether it would be appropriate initially for Covered Entities to
report information elicited by a limited subset of the applicable line
items on Part II and Part IIC of the FOCUS Report rather than all
applicable line items. Commenters supported this approach and a
commenter indicated the line items on the two forms that Covered
Entities could complete with information that they report pursuant to
other requirements.\27\ The Commission believes it would be appropriate
initially to limit the line items that Covered Entities complete on
Part II or Part IIC of the FOCUS Report (as applicable) to information
they draw from other reports or otherwise produce. This will allow them
to use existing systems and processes for calculating and producing the
information reported on the FOCUS Report Part II or Part IIC (as
applicable), while still producing information that will facilitate the
Commission's effective oversight of these entities. During this initial
period, the Commission will evaluate whether it would be appropriate to
require additional information to be reported by these filers in order
to achieve a comparable regulatory outcome to the FOCUS Report filing
requirements of Rule 18a-7. For these reasons, the order requires
Covered Entities to complete a limited set of applicable line items on
Part II or Part IIC of the FOCUS Report (as applicable).\28\
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\27\ See, e.g., SIFMA Letter re: Proposed Order (UK) at Appendix
B.
\28\ See paragraph (b) of the ordering language below. The
minimum required line items are highlighted on Part II of the FOCUS
Report attached as Appendix A (if not prudentially regulated) or
Part IIC of the FOCUS Report attached as Appendix B (if prudentially
regulated). An SBS Entity may report information elicited in other
line items on the applicable FOCUS Report if it chooses to do so.
Further, as is the case with SBS Entities, Covered Entities must
complete required line items if applicable. For example, under this
order, Covered Entities will need to complete line items linked to
Exchange rule 18a-4 (``Rule 18a-4''). 17 CFR 240.18a-4. However, the
Commission expects most, if not all, Covered Entities will operate
under an exemption to the segregation requirements of Rule 18a-4.
Almost all the line items linked to Rule 18a-4 apply if the Covered
Entity is not operating under the exemption. Therefore, a Covered
Entity operating under the exemption need not complete these line
items (there is a line item to indicate the firm is operating under
the exemption, which will need to be completed if applicable).
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ii. Report Information On A Consolidated or Unconsolidated Basis
A commenter requested that Covered Entities be permitted to present
the financial and operational information in the filings at the entity-
level of the Covered Entity on either a consolidated or unconsolidated
basis depending on the reporting basis the Covered Entity uses in its
home jurisdiction.\29\ The Commission believes it would be appropriate
for the purposes of this order to permit Covered Entities to present
the information in Part II or Part IIC of the FOCUS Report (as
applicable) at the entity level of the Covered Entity on the same basis
(consolidated or unconsolidated) that the Covered Entity presents
information in the financial reports it files in its home
jurisdiction.\30\ This will avoid Covered Entities having to prepare
two sets of financial statements: One for their home jurisdiction and
one for the purposes of this order, while still producing information
that will facilitate the Commission's effective oversight of these
entities.
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\29\ See SIFMA Letter re: Proposed Order (UK) at Appendix B.
\30\ See paragraph (c) of the ordering language below.
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iii. Covered Entities Without a Prudential Regulator Must Complete the
Regulatory Capital Section of Part IIC of the FOCUS Report
The Commission has issued substituted compliance orders that
[[Page 59211]]
permit Covered Entities to apply substituted compliance with respect to
the capital requirements of Rule 18a-1 applicable to Covered Entities
without a prudential regulator subject to certain conditions. One of
the conditions is that the Covered Entity is subject to and complies
with specified capital requirements in the firm's home jurisdiction.
The capital requirements in the home jurisdictions addressed in the
substituted compliance orders are based on the international capital
standard for banks (``Basel capital standard'').\31\ Part IIC of the
FOCUS Report--because it is used by prudentially regulated SBS
Entities--includes a section to report the firm's capital computation
under the Basel capital standard. Conversely, Part II of the FOCUS
Report includes sections to report capital computations under Exchange
Act rule 15c3-1 \32\ and Rule 18a-1. It does not contain a section to
report a capital computation under the Basel capital standard.
Moreover, as discussed above, substituted compliance with Rule 18a-7 is
conditioned on a Covered Entity without a prudential regulator applying
substituted compliance with respect to Rule 18a-1.
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\31\ See, e.g., BCBS, The Basel Framework, available at: <a href="https://www.bis.org/basel_framework/">https://www.bis.org/basel_framework/</a>.
\32\ 17 CFR 240.15c3-1.
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For these reasons, the order provides that Covered Entities without
a prudential regulator must complete the Regulatory Capital section
from Part IIC of the FOCUS Report, rather than completing the
Computation of Net Capital and Computation of Minimum Regulatory
Capital Requirements sections from Part II of the FOCUS Report.\33\
Because Part II of the FOCUS Report does not include a section to
calculate capital under the Basel capital standard, the version of that
form attached to this order has been modified to include the capital
calculation section from Part IIC of the FOCUS Report.
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\33\ See paragraph (d) of the ordering language below.
Initially, Covered Entities without a prudential regulator will need
to file the FOCUS Report Part II and the FOCUS Report Part IIC (with
only the Regulatory Capital section completed in the FOCUS Report
Part IIC). Eventually, the SEC eFOCUS may be configured so that
Covered Entities using Part II of the FOCUS Report to meet the
manner and format condition will be able to report a capital
calculation under the Basel capital standard using the relevant
section from the FOCUS Report Part IIC without having to separately
file the FOCUS Report Part IIC.
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iv. Report Basel Capital Standard Calculation Pursuant to Home Country
Requirements
A commenter requested that the Commission permit a Covered Entity
to complete the capital line items in the filings, if the FOCUS Report
Part IIC is used as the filing form, in a manner consistent with its
home jurisdiction's capital standards and related reporting
requirements.\34\ The Commission believes this accommodation to local
reporting requirements would be appropriate for Covered Entities with a
prudential regulator and for Covered Entities without a prudential
regulator applying substituted compliance for the capital requirements
of Rule 18a-1. This will avoid these firms having to perform and
present two Basel capital calculations (one pursuant to local
requirements and one pursuant to U.S. requirements). Moreover, the
Basel capital standard is an international standard that has been
adopted in the U.S. and in jurisdictions where substituted compliance
is available for capital. Therefore, requirements for how firms
calculate capital pursuant to the Basel capital standard generally
should be similar. Consequently, even though the capital section of
Part IIC of the FOCUS Report requires SBS Entities to complete the
Regulatory Capital section using the instructions accompanying form
FFIEC 031 (``Call Report''), Covered Entities completing the capital
section of Part IIC of the FOCUS Report pursuant to this order may rely
on local requirements to present the information on this section of the
FOCUS Report.\35\
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\34\ See SIFMA Letter re: Proposed Order (Germany) at 8; SIFMA
Letter re: Proposed Order (France) at 15.
\35\ See paragraph (d) of the ordering language below.
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v. Report GAAP Used In Memo Field to the FOCUS Report
As discussed above, the manner and format condition in the
Commission's substituted compliance orders requires Covered Entities to
file periodic unaudited financial and operational information with the
Commission or its designee in the manner and format required by
Commission rule or order and present the financial information in the
filing in accordance with GAAP that the Covered Entity uses to prepare
general purpose publicly available or available to be issued financial
statements in the home jurisdiction. Under this order, the Covered
Entity must notify the Commission in a memorandum field accompanying
the FOCUS Report the GAAP it uses to present the financial information
in the filing.\36\ This will allow the Commission to better understand
the information presented in the FOCUS Report and how it may differ
from information reported by SBS Entities pursuant to U.S. GAAP.
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\36\ See paragraph (e) of the ordering language below. In
particular, the Covered Entity will need to report this information
in the memorandum field for line item 12003 or 12004 (as applicable)
of the FOCUS Report Part II if not prudentially regulated or line
item 12758 or 12759 (as applicable) of the FOCUS Report Part IIC if
prudentially regulated. Covered Entities may include this GAAP
notice with the FOCUS Reports Part II and Part IIC (as applicable)
filed pursuant to instructions on the Commission's website if the
SEC eFOCUS system is not ready to receive them by the required first
filing deadline and, thereafter, until the SEC eFOCUS system is
ready to receive the FOCUS Reports.
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vii. Follow FOCUS Report Instructions Unless Inconsistent With This
Order
Finally, the Covered Entity must follow the instructions for
completing the FOCUS Report Part II or Part IIC, as applicable, to the
extent the instructions are not inconsistent with the provisions of the
order.\37\ This includes presenting information in U.S. dollars (not in
local currencies).\38\ However, a prudentially regulated Covered Entity
filing the FOCUS Report Part IIC need not follow instructions referring
to line items on the Call Report to the extent the Covered Entity does
not report the required information in a Call Report pursuant to that
instruction.\39\
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\37\ See paragraph (f) of the ordering language below.
\38\ Covered Entities may convert local currencies at a ``top-
line'' level to U.S. dollars at the spot rate applicable on the ``as
of'' date of the reported amount.
\39\ If the Covered Entity files a Call Report in the U.S. with
a prudential regulator pursuant to the instructions for the Call
Report, it should follow the instructions in the FOCUS Report Part
IIC to report information in that report to the extent the same
information is reported by the Covered Entity in the Call Report.
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III. Conclusion
It is hereby ordered that a Covered Entity must meet the manner and
format condition in a Commission order granting conditional substituted
compliance with respect Exchange Act rule 18a-7 by:
(a)(1) If not prudentially regulated, filing through the SEC eFOCUS
system a FOCUS Report Part II 35 calendar days after the end of each
month; or
(2) If prudentially regulated, filing through the SEC eFOCUS system
the FOCUS Report Part IIC 35 calendar days after the end of each
quarter;
(b)(1) If not prudentially regulated, entering the required
information on the line items (as applicable) highlighted on the FOCUS
Report Part II attached as Appendix A to this order on the FOCUS Report
Part II filed pursuant to paragraph (a)(1) above; or
(2) If prudentially regulated, entering the required information on
the line items (as applicable) highlighted on the FOCUS Report Part IIC
attached as Appendix B to this order on the FOCUS
[[Page 59212]]
Report Part IIC filed pursuant to paragraph (a)(2) above;
(c) Presenting the information in the FOCUS Report Part II or Part
IIC (as applicable) filed pursuant to paragraph (a) above at the entity
level of the Covered Entity on the same basis (consolidated or
unconsolidated) that the Covered Entity presents information in the
financial reports it files in its home jurisdiction;
(d) Completing the Regulatory Capital section of the FOCUS Report
Part IIC and presenting the information in that section in accordance
with the reporting requirements of the Covered Entity's home
jurisdiction;
(e) Identifying the generally accepted accounting principles being
used to present the information in the FOCUS Report Part II or Part IIC
(as applicable) filed pursuant to paragraph (a) above in the memo field
for line item 12003, 12004, 12758, or 12759 (as applicable) of the
report in the SEC eFOCUS system; and
(f) Reporting the information in the FOCUS Report Part II or Part
IIC (as applicable) filed pursuant to paragraph (a) above in accordance
with the instructions for those reports; except that the Covered Entity
can report the information:
(1) In a manner consistent with a condition of this order, if the
instruction conflicts with the condition; or
(2) In a manner consistent with the requirements of its home
jurisdiction, if the instruction on the FOCUS Report Part IIC requires
information submitted on the Call Report and the Covered Entity does
not report the required information on a Call Report.
By the Commission.
Dated: October 14, 2021.
Eduardo A. Aleman,
Deputy Secretary.
BILLING CODE 8011-01-P
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[FR Doc. 2021-22817 Filed 10-25-21; 8:45 am]
BILLING CODE 8011-01-C
</pre></body>
</html>Indexed from Federal Register on October 26, 2021.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.