SEC Moves Forward On German And French SBSD Substituted Compliance

The SEC issued a final substituted compliance order for security-based swap dealers ("SBSDs") regulated by German authorities and a proposed substituted compliance order for SBSDs regulated by French authorities.

The SEC adopted a substituted compliance determination for the German-supervised SBSDs. The SEC had previously published a proposed order in response to a request by German financial authority Bundesanstalt für Finanzdienstleistungsaufsicht (see previous coverage here). In finalizing the order, the SEC granted conditional substituted compliance pursuant to SEA Rule 3a71-6 for requirements pertaining to risk control, internal supervision and compliance, recordkeeping and reporting, and counterparty protection. The SEC made a number of modifications to the proposed order in response to comments on the proposal.

The SEC also published a proposed substituted compliance order in response to an application submitted by France's Autorité des marchés financiers and Autorité de contrôle prudentiel et de résolution. Unlike the German order, the French proposal also addresses requirements (such as margin and capital) applicable to non-prudentially regulated SBSDs (e.g., non-bank SBSDs).

The German order is effective immediately. Comments on the French proposed order must be submitted within 25 days of its publication in the Federal Register.

Primary Sources

1. SEC Press Release: SEC Issues Substituted Compliance Order for Germany and Notice of Substituted Compliance Application and Proposed Substituted Compliance Order for France
2. SEC Order: Order Granting Conditional Substituted Compliance in Connection with Certain Requirements Applicable to Non-U.S. Security-Based Swap Dealers and Major Security-Based Swap Participants Subject to Regulation in the Federal Republic of Germany
3. SEC Proposed Order: Notice of Substituted Compliance Application Submitted by the French Autorité des Marchés Financiers and the Autorité de Contrôle Prudential et de Résolution in Connection with Certain Requirements Applicable to Non-U.S. Security-Based

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