SEC Issues Substituted Compliance Order for Germany and Notice of Substituted Compliance Application and Proposed Substituted Compliance Order for France

Dec 22nd '20

The Securities and Exchange Commission (SEC) has voted to take two actions to advance implementation of security-based swap regulation under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act.  First, the Commission is publishing a final substituted compliance order in response to an application by Germany’s Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin).  In addition, the Commission is publishing a notice of application and proposed substituted compliance order in response to an application by France’s Autorité des Marchés Financiers (AMF) and Autorité de Contrôle Prudential et de Résolution (ACPR).       


“These actions reflect the latest of the Commission’s ongoing efforts, including engagement with multiple agencies and foreign counterparts, to stand up the Dodd-Frank Title VII regime and prepare for the registration of security-based swap dealers in 2021,” said SEC Chairman Jay Clayton.  “I thank our German, French and EU colleagues for their tireless efforts to advance cross-border regulatory cooperation, and SEC Commissioner Hester Peirce for her leadership in advancing efforts to stand up the Dodd-Frank Title VII regime.”


The substituted compliance order for Germany provides that certain German firms that are registered with the Commission as security-based swap dealers and major security-based swap participants conditionally may satisfy certain requirements under the Securities Exchange Act of 1934 by complying with comparable German and European Union (EU) requirements.  The Commission retains the authority to inspect, examine and supervise non-U.S. firms and take enforcement action as appropriate.  The Commission and BaFin also have entered into a memorandum of understanding to address supervisory and enforcement cooperation and other matters arising under substituted compliance.


The French application similarly seeks substituted compliance for French security-based swap entities based on compliance with French and EU requirements.  In contrast to the German order, the French proposed order also makes a proposed substituted compliance determination with respect to non-prudentially regulated firms’ capital, margin, recordkeeping, reporting, notification, and securities count requirements under the Exchange Act.


These actions reflect the Commission’s consideration of the comparability of applicable non-U.S. requirements, and incorporate conditions intended to help promote comparability in practice.


“Substituted compliance is a critical component to the workable yet effective regulation of the global OTC derivatives markets,” said SEC Commissioner Hester Peirce.  “I am pleased that the Commission is taking these steps, including considering substituted compliance with respect to capital and margin requirements in connection with the French application.  I look forward to considering applications for substituted compliance for additional jurisdictions in the near future.”


The public comment period for the French application will remain open for 25 days following publication of the notice and proposed order in the Federal Register.  Additional information about substituted compliance applications is available at:


Read: Fact Sheet


Source: SEC