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SEC Updates SBSD Registration Materials, Includes Substituted Compliance Questionnaire

nihal.patel@cwt.com's picture
Commentary by Nihal Patel

The SEC updated its materials for security-based swap dealer registration, including a staff questionnaire for non-U.S. security-based swap dealers ("SBSDs") filing a substituted compliance application.

In order to permit substituted compliance (that is, to determine that a non-U.S. SBSD's compliance with its local home office law will be deemed to satisfy certain SEC requirements), the SEC must assess (i) the scope and intent of the foreign requirements, (ii) the extent of the foreign supervisory compliance program's effectiveness, and (iii) how the foreign enforcement exercises its authority. The questionnaire is intended to gather information relating to the foreign authority's (i) supervisory framework, (ii) enforcement framework, and (iii) supervisory and enforcement cooperation among the SEC and foreign authority. The SEC is particularly concerned with its ability to obtain relevant records generated by non-U.S. SBSDs. The questionnaire indicates that information provided in response will be kept "non-public to the extent permitted by law."

In addition, the SEC updated (i) its brief primer on "Exchange Act Substituted Compliance Applications for Security-Based Swap Markets" and (ii) its list of "Key Dates for Registration of Security-Based Swap Dealers and Major Security-Based Swap Participants."

On its website, the SEC provides the following timeline:

  • August 6, 2021 is the "counting date" (i.e., the date on which persons must begin to count transactions for determining whether the security-based swap de minimis threshold is crossed).

  • Persons who cross the threshold in August 2021 will be required to file a complete application for registration no later than November 1, 2021.

  • A security-based swap between a non-U.S. person and a non-U.S. branch of a U.S. person (other than an SBSD) will count for de minimis purposes on or after December 31, 2021.

Commentary

Non-U.S. SBSD that expect to register with the SEC should closely review the materials and be working with local regulators to submit questionnaires and applications in the near future. This is important so that approvals (which require Federal Register publication and a comment period) can be granted well in advance of the registration deadlines. Getting substituted compliance in place can help to avoid devoting resources towards developing compliance frameworks for SEC rules that may not be relevant to a non-U.S. dealer.

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