SEC Clarifies Compliance Requirements for Non-US Security-Based Swap Entities

SEC Division of Trading and Markets staff issued new FAQs concerning substituted compliance requirements for Chief Compliance Officers ("CCOs") of security-based swap dealers ("SBSDs") and the opinions and certifications that non-US swap dealers must file with the SEC.  

The FAQs concern substituted compliance requirements under SEA Section 15F ("Registration and regulation of security-based swap dealers") and Rule 15F(k) ("Designation of chief compliance officer for security-based swap dealers"). The SEC clarified that:

• a firm may not provide an altered version of a report(s) required pursuant to the relevant foreign law;
• a firm may not create and provide the [SEC] a "single annual report in lieu of providing the SEC with all the reports the firm creates under the foreign requirements specified in the relevant substituted compliance order and still use substituted compliance;" and 
• a firm may not provide the SEC the required report "under Rule 15F(k) in lieu of the reports required by the relevant substituted compliance."

Regarding opinions and certifications pursuant to rules SEA 15F(b)2-4(c) ("Nonresident security-based swap dealers and major security-based swap participants") and SEA 3a71-6(c)(2)(ii) ("Substituted compliance for security-based swap dealers and major security-based swap participants"), the SEC clarified that:

• an opinion or certification cannot be subject to assumptions, qualifications, reservations, or conditions to satisfy foreign legal requirements (except as addressed in an SEC 2019 release);
• an opinion and certification may not exclude non-security-based-swap business line and/or foreign business line books and records;
• an opinion or certification may not state that it is given in reliance on the regulatory arrangements or SEC determination;
• an opinion or certification may not address solely a branch or subsidiary of the firm; and
• an opinion may not state that the SEC is not permitted to rely on the opinion’s conclusions or disclaim the opinion giver's responsibility or liability.