Featured Product

    SEC Proposes to Modify Substituted Compliance Order Post BaFin Request

    August 18, 2021

    The U.S. Securities and Exchange Commission (SEC) is seeking comments on an application of the Federal Financial Supervisory Authority of Germany (BaFin), which requests SEC to amend an existing substituted compliance Order for Germany. The request is to extend the Order to non-bank capital and margin requirements (the Amended Application). SEC is proposing to amend and restate the Order, with the comment period ending on September 13, 2021. In light of the Amended Application, SEC is also proposing to add a new general condition that would predicate substituted compliance on the presence of a supervisory and enforcement memorandum of understanding between SEC and the European Central Bank (ECB) and/or BaFin, pertaining to information owned by ECB. SEC's access to this ECB information will assist in effective oversight of covered Entities that use substituted compliance in connection with capital and margin requirements.

    Rule 3a71-6 under the Exchange Act provides a framework under which non-U.S. security-based swap dealers and major security-based swap participants (security-based swap entities) may satisfy certain requirements under Section 15F of Exchange Act by complying with comparable regulatory requirements of a foreign jurisdiction. Pursuant to rule 3a71-6, in December 2020, SEC issued a substituted compliance Order to provide that German security-based swap entities may use substituted compliance with conditions to satisfy certain requirements under the Exchange Act related to risk control, internal supervision and compliance, counterparty protection, and books and records. In the preliminary view of SEC, certain developments warrant modifications to the substituted compliance Order for Germany. Since finalizing the Order, SEC has finalized substituted compliance orders for security-based swap entities subject to regulation in France and UK. Given substantial similarity of the three regimes, SEC believes that modifications to the Order may be necessary for consistency. SEC is, therefore, proposing to amend this Order to align it with the French and UK orders, where appropriate.

    Moreover, BaFin's amended application requests that SEC extend the Order to provide for substituted compliance for the capital requirements of Exchange Act Section 15F(e) and Exchange Act rules 18a-1 through 18a-1d, the margin requirements Exchange Act Section 15F(e) and Exchange Act rule 18a-3 and the related recordkeeping, reporting, notification, and securities count requirements. Thus, SEC is proposing to amend the Order to conditionally permit German security-based swap entities to comply with these requirements via substituted compliance. SEC is also proposing to modify the Order's general condition requiring that covered entities provide SEC with written notice of their intent to rely on substituted compliance. To promote clarity in the notice regarding the covered entity's intended use of substituted compliance, SEC is proposing to amend the general condition to require that the notice identify each specific substituted compliance determination for which the covered entity intends to apply substituted compliance. 

     

    Related Link: Federal Register Notice

    Comment Due Date: September 13, 2021

    Keywords: Americas, Europe, Germany, US, Banking, Regulatory Capital, Margin Requirements, Swaps, Substituted Compliance, Derivatives, ECB

    Featured Experts
    Related Articles
    News

    ESAs Issue Multiple Regulatory Updates for Financial Sector Entities

    The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.

    November 15, 2022 WebPage Regulatory News
    News

    ISSB Makes Announcements at COP27; IASB to Propose IFRS 9 Amendments

    The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.

    November 10, 2022 WebPage Regulatory News
    News

    IOSCO Prioritizes Green Disclosures, Greenwashing, and Carbon Markets

    The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.

    November 09, 2022 WebPage Regulatory News
    News

    EBA Finalizes Methodology for Stress Tests, Issues Other Updates

    The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups

    November 09, 2022 WebPage Regulatory News
    News

    OSFI Sets Out Work Priorities and Reporting Updates for Banks

    The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.

    November 07, 2022 WebPage Regulatory News
    News

    APRA Finalizes Changes to Capital Framework, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.

    November 03, 2022 WebPage Regulatory News
    News

    BIS Hub and Central Banks Conduct CBDC and DeFI Pilots

    The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.

    November 03, 2022 WebPage Regulatory News
    News

    ECB Sets Deadline for Banks to Meet Its Climate Risk Expectations

    The European Central Bank (ECB) published the results of its thematic review, which shows that banks are still far from adequately managing climate and environmental risks.

    November 02, 2022 WebPage Regulatory News
    News

    ESAs, ECB, & EC Issue Multiple Regulatory Updates for Financial Sector

    Among its recent publications, the European Banking Authority (EBA) published the final standards and guidelines on interest rate risk arising from non-trading book activities (IRRBB)

    October 31, 2022 WebPage Regulatory News
    News

    EC Adopts Final Rules Under CRR, BRRD, and Crowdfunding Regulation

    The European Commission (EC) recently adopted regulations with respect to the calculation of own funds requirements for market risk, the prudential treatment of global systemically important institutions (G-SIIs)

    October 26, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8582