The SEC Division of Trading and Markets issued guidance to "facilitate applications" for certain substituted compliance based on the security-based swap requirements of a non-U.S. jurisdiction.
According to the SEC staff, the guidance is intended to help persons submitting applications under SEA Rule 3a71-6 by (i) posing relevant questions regarding the relevant foreign requirements in comparison with the Exchange Act requirements, and (ii) describing the relevant Exchange Act requirements in detail.
The staff provided information on five categories of requirements that will be applicable to security-based swap dealers and/or major security-based swap participants:
risk control: (i) capital, (ii) margin, (iii) risk management system, and (iv) trade acknowledgment and verification requirements;
recordkeeping and reporting: (i) record creation, (ii) record maintenance, and (iii) reporting and notice requirements;
internal supervision and compliance: (i) supervision, (ii) conflict of interest, and (iii) chief compliance officer requirements;
counterparty protection: (i) fair and balanced communications, (ii) disclosure of certain risks, characteristics, incentives and conflicts, (iii) daily mark disclosure, (iv) "know your counterparty", (v) suitability of recommendations, and (vi) disclosure of clearing rights requirements; and
additional requirements: (i) eligible contract participant verification and (ii) special entities and political contributions.
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