Notice2025-09476
Proposed Collection; Comment Request; Extension: Business Conduct Standards for Security-Based Swap Dealers and Major Security-Based Swap Participants
Primary source
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Published
May 28, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 101 (Wednesday, May 28, 2025)</title>
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[Federal Register Volume 90, Number 101 (Wednesday, May 28, 2025)]
[Notices]
[Pages 22551-22552]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-09476]
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SECURITIES AND EXCHANGE COMMISSION
[OMB Control No. 3235-0732]
Proposed Collection; Comment Request; Extension: Business Conduct
Standards for Security-Based Swap Dealers and Major Security-Based Swap
Participants
Upon Written Request, Copies Available From: Securities and Exchange
Commission, Office of FOIA Services, 100 F Street NE, Washington, DC
20549-2736
Notice is hereby given that, pursuant to the Paperwork Reduction
Act of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange
Commission (``SEC'' or ``Commission'') is soliciting comments on the
proposed collection of information provided for in Business Conduct
Standards for Security-Based Swap Dealers and Major Security-Based Swap
Participants \1\ (17 CFR 240.3a67-10, 240.3a71-3, 240.3a71-6, 240.15Fh-
1 through 15Fh-6 and 240.15Fk-1), under the Securities Exchange Act of
1934 (15 U.S.C. 78a et seq.) (``Exchange Act'').
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\1\ Business Conduct Standards for Security-Based Swap Dealers
and Major Security-Based Swap Participants, Exchange Act Release
77617 (Apr. 14, 2016), 81 FR 29959 (May 13, 2016). See also Business
Conduct Standards for Security-Based Swap Dealers and Major
Security-Based Swap Participants; Correction, Exchange Act Release
77617A (May 19, 2016), 81 FR 32643 (May 24, 2016) (together, the
``BCS Rules'').
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In 2010, Congress enacted the Dodd-Frank Act, establishing a
comprehensive framework for regulating the over-the-counter swaps
markets.\2\ As required by Title VII of the Dodd-Frank Act, new section
15F(h) of the Exchange Act established business conduct standards for
security-based swap Dealers (``SBS Dealers'') and Major security-based
swap Participants (``collectively ``SBS Entities'') in their dealings
with counterparties, including special entities.\3\
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\2\ Dodd-Frank Wall Street Reform and Consumer Protection Act,
Public Law 111-203, 124 Stat. 1376 (2010) (``Dodd-Frank Act'').
\3\ ``Special Entity'' means: a federal agency; State, State
agency, city, county, municipality, other political subdivision of a
State, or any instrumentality, department, or a corporation of or
established by a State or political subdivision of a State; any
employee benefit plan subject to Title I of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1002); any governmental plan,
as defined in Section 3 of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1002); any endowment, including an endowment
that is an organization described in Section 501(c)(3) of the
Internal Revenue Code of 1986 (26 U.S.C. 501(c)(3)); or any employee
benefit plan defined in Section 3 of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1002), not otherwise defined as a
Special Entity, that elects to be a Special Entity by notifying a
swap dealer or major swap participant of its election prior to
entering into a swap with the particular swap dealer or major swap
participant. 17 CFR 23.401(c).
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In 2016, in order to implement the Dodd-Frank Act, the Commission
adopted the BCS Rules for SBS Dealers and Major SBS Participants,\4\ a
comprehensive set of business conduct standards and chief compliance
officer (``CCO'') requirements applicable to SBS Entities, that are
designed to enhance transparency, facilitate informed customer
decision-making, and heighten standards of professional conduct to
better protect investors.
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\4\ See supra note 1.
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Rules 15Fh-1 through 15Fh-6 and 15Fk-1 require SBS Entities to:
<bullet> Verify whether a counterparty is an eligible contract
participant and whether it is a special entity;
<bullet> Disclose to the counterparty material information about
the security-based swap, including material risks, characteristics,
incentives and conflicts of interest;
<bullet> Provide the counterparty with information concerning the
daily mark of the security-based swap;
<bullet> Provide the counterparty with information regarding the
ability to require clearing of the security-based swap;
<bullet> Communicate with counterparties in a fair and balanced
manner based on principles of fair dealing and good faith;
<bullet> Establish a supervisory and compliance infrastructure; and
<bullet> Designate a CCO that is required to fulfill the described
duties and provide an annual compliance report.
The rules also require SBS Dealers to:
<bullet> Determine that recommendations they make regarding
security-based swaps are suitable for their counterparties.
<bullet> Establish, maintain and enforce written policies and
procedures reasonably designed to obtain and retain a record of the
essential facts concerning each known counterparty that are necessary
to conduct business with such counterparty; and
<bullet> Comply with rules designed to prevent ``pay-to-play.''
The rules also define what it means to ``act as an advisor'' to a
special entity, and require an SBS Dealer who acts as an advisor to a
special entity to:
<bullet> Make a reasonable determination that any security-based
swap or trading strategy involving a security-based swap recommended by
the SBS Dealer is in the best interests of the special entity whose
identity is known at a reasonably sufficient time prior to the
execution of the transaction to permit the SBS Dealer to comply with
this obligation; and
<bullet> Make reasonable efforts to obtain such information that
the SBS Dealer considers necessary to make a reasonable determination
that a security-based swap or trading strategy involving a security-
based swap is in the best interests of the known special entity.
In addition, the rules require SBS Entities acting as
counterparties to special entities to reasonably believe that the
counterparty has an independent representative who meets the following
requirements:
<bullet> Has sufficient knowledge to evaluate the transaction and
risks;
<bullet> Is not subject to a statutory disqualification;
<bullet> Undertakes a duty to act in the best interests of the
special entity;
<bullet> Makes appropriate and timely disclosures to the special
entity of material information concerning the security-based swap;
<bullet> Evaluates, consistent with any guidelines provided by the
special entity, the fair pricing and the appropriateness of the
security-based swap;
<bullet> Is independent of the security-based swap dealer or major
security-based swap participant that is the counterparty to a proposed
security-based swap.
Under the rules, the special entity's independent representative
must also be subject to pay-to-play regulations, and if the special
entity is an ERISA plan, the independent representative must be an
ERISA fiduciary.
The information that must be collected pursuant to the BCS Rules is
intended to increase accountability and transparency in the market. The
information should therefore help establish a framework that protects
investors and promotes efficiency, competition and capital formation.
Based on a review of recent data, as of 2025, the Commission staff
estimate the number of respondents to be as follows: 53 SBS Dealers, 0
Major SBS Participants, for a total of 53 ``SBS
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Entities.'' \5\ Further, The Commission staff estimate that
approximately 46 of these 53 SBS Entities will be dually registered
with the CFTC as Swap Entities. The Commission staff also estimate that
there are currently 16,061 security-based swap market participants of
which 12,406 are also swap market participants.\6\ From October 2021
through September 2022, the Commission staff estimate that there were
approximately 377,271 security-based swap transactions between an SBS
Dealer and counterparty that is not an SBS Dealer of which
approximately 234,654 were new and 5,559 amended trades (totaling
240,213). The Commission staff estimate there are 283 independent,
third-party representatives and 22 in-house independent
representatives, for a total of 305 independent representatives.\7\ The
Commission staff estimate that there are approximately 14,005 unique
SBS Dealer and non-SBS-Dealer pairs.\8\ The Commission staff have used
these estimates in calculating the hour and cost burdens for the rule
provisions that the Commission staff anticipate have a ``collection of
information'' burden within the meaning of the PRA.
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\5\ List of Registered Security-Based Swap Dealers and Major
Security-Based Swap Participants, available at: <a href="https://www.sec.gov/about/divisions-offices/division-trading-markets/list-registered-security-based-swap-dealers-major-security-based-swap-participants">https://www.sec.gov/about/divisions-offices/division-trading-markets/list-registered-security-based-swap-dealers-major-security-based-swap-participants</a>
(providing the list of registered security-based swap dealers and
major security-based swap participants that was updated as of
December 31, 2024). Information concerning Swap Entities registered
with the CFTC available at: (<a href="https://www.cftc.gov/IndustryOversight/Intermediaries/MajorSwapParticipantMSP/index.htm">https://www.cftc.gov/IndustryOversight/Intermediaries/MajorSwapParticipantMSP/index.htm</a>).
\6\ Unless otherwise noted, estimates were derived from the
DTCC-TIW data set (November 30, 2006 through September 2022). In
October 2022, DTCC-TIW transaction data went through a major
structural change. Commission staff are still in the process of
resolving the consistency issue associated with this data.
\7\ See Information About Registered Municipal Advisors as of
January 1, 2025 (<a href="https://www.sec.gov/data-research/sec-markets-data/information-about-registered-municipal-advisors">https://www.sec.gov/data-research/sec-markets-data/information-about-registered-municipal-advisors</a>).
\8\ See supra note 6.
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The Commission staff estimate that the aggregate burden of the
ongoing reporting and disclosures required by the BCS Rules, as
described above, is approximately 535,595 hours and $2,522,058
calculated as follows:
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Ongoing annual Ongoing annual Industry-wide Industry-wide
burden burden annual burden annual burden
IC Title Type of burden Respondents -------------------------------------------------------------------
Hours Cost Hours Cost
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15Fh-3(b), (c), (d):
Disclosures--SBS Entities.......... Reporting................. 53 4,120 $0 218,360 $0
15Fh-3(b), (c), (d):
Disclosures--SBS Transactions Reporting................. 53 4,427.4 0 234,654 0
Between SBS Dealer and Non-SBSD
Counterparty.
15Fh-3(e), (f):
Know Your Counterparty and Reporting................. 53 132.1 0 7,003 0
Recommendations (SBS Dealers).
15Fh-3(g):
Fair and Balanced Communications... Reporting................. 53 2 4,158 106 220,374
15Fh-3(h):
Supervision........................ Reporting................. 53 540 5,544 28,620 293,832
15Fh-5:
SBS Entities Acting as Reporting................. 53 305 0 16,165 0
Counterparties to Special Entities.
15Fh-5:
SBS Entities Acting as Third-Party Disclosure.... 53 305 0 16,165 0
Counterparties to Special Entities.
15Fh-6:
Political Contributions............ Reporting................. 53 1 29,568 53 1,567,104
15Fk-1:
Chief Compliance Officer........... Reporting................. 53 273 8,316 14,469 440,748
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Total.......................... .......................... ............... ............... ............... 535,595 2,522,058
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An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a
currently valid OMB Control Number.
Written comments are invited on: (a) whether this proposed
collection of information is necessary for the proper performance of
the functions of the SEC, including whether the information will have
practical utility; (b) the accuracy of the SEC's estimate of the burden
imposed by the proposed collection of information, including the
validity of the methodology and the assumptions used; (c) ways to
enhance the quality, utility, and clarity of the information to be
collected; and (d) ways to minimize the burden of the collection of
information on respondents, including through the use of automated,
electronic collection techniques or other forms of information
technology.
Please direct your written comment to Austin Gerig, Director/Chief
Data Officer, Securities and Exchange Commission, c/o Tanya Ruttenberg,
100 F Street NE, Washington, DC 20549 and send it by email to
<a href="/cdn-cgi/l/email-protection#712110011403061e031a231415041205181e1f301205310214125f161e07"><span class="__cf_email__" data-cfemail="1646776673646179647d4473726375627f79785775625665737538717960">[email protected]</span></a> within 60 days of publication of this
notice, by July 28, 2025.
Dated: May 21, 2025.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-09476 Filed 5-27-25; 8:45 am]
BILLING CODE 8011-01-P
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