Managing Director, Head of Derivatives Policy

October 27, 2021

Ms. Kyle Brandon

Managing Director, Head of Derivatives Policy

Securities Industry and Financial Markets Association

120 Broadway, 35th Floor

New York, NY 10271-0080

Re:

Financial Reporting Requirements for Security-Based Swap Dealers and Major

Security-Based Swap Participants (“SBSEs”)

Dear Ms. Brandon:

In your October 25, 2021 letter (“Letter”) on behalf of the Securities Industry and Financial

Markets Association (“SIFMA”), you request written assurance that the staff of the Division of

Trading and Markets (“Division”) of the U.S. Securities and Exchange Commission

(“Commission”) will not recommend enforcement action to the Commission under section 15F(f)

of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 18a-7 thereunder (“Rule 18a7”) with respect to the deadline for filing Form X-17A-5 (“FOCUS Report”) Part IIC and for

making unaudited financial statements publicly available. More specifically, you request a

Division no-action position for SBSEs for which there is a prudential regulator (“bank SBSEs”) to

file the FOCUS Report Part IIC within the deadline to file FFIEC Form 031 (the “Call Report”)

with its prudential regulators. You also request a Division no-action position for an SBSE that is

not also registered with the Commission as a broker-dealer or regulated by a prudential regulator

(“stand-alone SBSE”) to make its unaudited financial statements publicly available on its website

within 55 days of the date of the unaudited financial statements, rather than within 30 days of the

date of the unaudited financial statements. We understand the following facts are relevant to your

request.

FOCUS Report Part IIC

On September 19, 2019, the Commission adopted recordkeeping, reporting, and

notification requirements for SBSEs and additional recordkeeping and reporting requirements for

broker-dealers to account for their security-based swap activities. 1 Among other things, the

Commission adopted Rule 18a-7(a)(2) that requires bank SBSEs to file FOCUS Report Part IIC

on a quarterly basis. 2 FOCUS Report Part IIC is a new form for bank SBSEs to report unaudited

1

See Recordkeeping and Reporting Requirements for Security-Based Swap Dealers, Major Security-Based

Swap Participants, and Broker-Dealers, Securities Exchange Act Release No. 87005 (Sept. 19, 2019), 84 FR

68550 (Dec. 16, 2019) (“Recordkeeping Adopting Release”).

2

See 17 CFR 240.18a-7.

Ms. Kyle Brandon

October 27, 2021

Page 2 of 3

financial information and largely contains the same information that banks are required to report

in the Call Report. Rule 18a-7(a)(2) states that FOCUS Report Part IIC is due 30 calendar days

after the end of the Bank SBSE’s fiscal quarter. 3 The Recordkeeping Adopting Release states that

the 30 calendar day deadline was intended to match the prudential regulators’ deadline for filing

the Call Report. 4 However, the staff understands that certain U.S. banks may file the Call Report

up to 35 calendar days after the end of the quarter. 5 The U.S. Commodity Futures Trading

Commission (“CFTC”) staff has issued a no-action position if a bank swap dealer submits the

unaudited financial reports required by CFTC Rule 105(p)(2) within the timeframe permitted by

its applicable prudential regulator to file its Call Reports. 6

Based on the facts and circumstances described in your letter (and without necessarily

agreeing with your conclusions and analysis), Division staff will not recommend enforcement

action to the Commission under Exchange Act section 15F(f) and Rule 18a-7 thereunder if a bank

SBSE files FOCUS Report Part IIC within the deadline to file the Call Report with its applicable

prudential regulator or within 35 calendar days of the end of the quarter, whichever is sooner.

Publicly Available Unaudited Financial Statements

The Recordkeeping Adopting Release also adopts Rule 18a-7(b)(2), which requires standalone SBSEs to make publicly available on their website the firm’s unaudited financial statements

as of the date that is six months after the date of the most recent audited financial statements filed

with the Commission. These reports must be made publicly available within 30 calendar days of

the date of the statements. 7 In contrast, a broker-dealer must furnish its unaudited midyear

financial statements 65 days after the date of the unaudited statements. The Recordkeeping

Proposing Release states that the Commission proposed a shorter time period for stand-alone

SBSEs’ web-based disclosure of their unaudited financial statements, as compared to brokerdealers’ mailing to customers of their unaudited financial statements, because posting this

3

See 17 CFR 240.18a-7(a)(2).

4

See Recordkeeping Adopting Release, 84 FR at 68572 (“In response to the Commission’s proposal to require

bank SBSDs and MSBSPs to file Form SBS seventeen business days after the end of the quarter, a commenter

requested that it change the deadline to match the prudential regulators’ requirement to file call reports thirty

calendar days after the end of the quarter. To respond to the commenter’s concerns, as well as to promote

harmonization with prudential regulators’ requirements, the Commission is adopting a thirty calendar-day

requirement as requested by the commenter.”).

5

See Call Report Instructions, available at

https://www.ffiec.gov/pdf/FFIEC_forms/FFIEC031_FFIEC041_201406_i.pdf (“Any bank that has more than

one foreign office, other than a "shell" branch or an IBF, may take an additional limited period of time to

submit its Call Report. The CDR must receive the data file for such a bank's Call Report no more than 35

calendar days after the report date. Such banks are urged to use the additional time only if absolutely necessary

and to make every effort to report as soon as possible, preferably within the 30-day submission period.”)

6

See Letter from Amanda L. Olear, Acting Director, CFTC, to Kyle Brandon, Managing Director, Head of

Derivatives Policy, SIFMA, and Stephen Kennedy, Global Head of Public Policy, International Swaps and

Derivatives Association (Aug. 31, 2021), available at https://www.cftc.gov/csl/21-18/download.

7

See 17 CFR 240.18a-7(b)(2).

Ms. Kyle Brandon

October 27, 2021

Page 3 of 3

information on a website should take less time than mailing documents. 8 You state that even

though stand-alone SBSEs do not need to mail their unaudited financial statements to customers,

the 30-day deadline is unduly burdensome because it comes before a stand-alone SBSE’s parent

company is required to file unaudited financial statements in its Form 10-Q (i.e., 40 or 45 days

after its fiscal quarter-end). 9

Based on the facts and circumstances described in your letter (and without necessarily

agreeing with your conclusions and analysis), Division staff will not recommend enforcement

action to the Commission under Exchange Act section 15F(f) and Rule 18a-7 thereunder if a standalone SBSE makes public on its website the firm’s midyear unaudited financial statements within

55 calendar days of the date of the statements. 10

Conclusion

This Division staff position is based strictly on the facts and circumstances stated in your

letter, and any different facts or circumstances might require a different response. Furthermore,

this response expresses Division staff’s position on enforcement action only and does not purport

to express any legal conclusions on the questions presented. The Division staff expresses no view

with respect to any other questions that the proposed activities may raise, including the

applicability of any other federal or state laws, or self-regulatory organization rules. This position

is subject to modification or revocation at any time.

If you have any questions regarding this letter, please contact Valentina Deng, Special

Counsel at (202) 551-5778, Randall W. Roy, Deputy Associate Director at (202) 551-5522, or me

at (202) 551-5525.

Sincerely,

Digitally signed by

Michael

Macchiaroli Macchiaroli,

A.

, Michael A. Date: 2021.10.27

15:46:15 -04'00'

Michael A. Macchiaroli

Associate Director

Division of Trading and Markets

8

See Recordkeeping and Reporting Requirements for Security-Based Swap Dealers, Major Security-Based

Swap Participants, and Broker-Dealers; Capital Rule for Certain Security-Based Swap Dealers; Proposed

Rules; Exchange Act release no. 71958 (Apr. 17, 2014), 79 FR 25194, 25238, n.649 (May 2, 20214)

(“Recordkeeping Proposing Release”).

9

See Commission, Form 10-Q General Instructions, available at https://www.sec.gov/files/form10-q.pdf.

10

The staff believes a deadline of 55 days is appropriate because it allows stand-alone SBSEs 10 days beyond

their Form 10-Q deadline to prepare their unaudited mid-year financial statements, but also allows less time

than broker-dealers with a similar requirement because broker-dealers are required to furnish certain

information to each customer instead of simply posting it on a website. See 17 CFR 240.17a-5(c)(5) (requiring

broker-dealers to send customers a financial disclosure statement containing certain information even if they

post unaudited financial statements on their website).

October 25, 2021

Michael A. Macchiaroli

Associate Director

Division of Trading and Markets

U.S. Securities and Exchange Commission

100 F Street, NE

Washington, D.C. 20549

Re:

Financial Reporting Requirements for Security-Based Swap Entities

Dear Mr. Macchiaroli:

The Securities Industry and Financial Markets Association (“SIFMA”) 1 is requesting that

the staff of the Division of Trading Markets (the “Staff”) of the U.S. Securities and Exchange

Commission (the “Commission” or “SEC”) issue a no-action position as described below,

relating to financial reporting for security-based swap dealers (“SBSDs”) and major securitybased swap participants (together with SBSDs, “SBS Entities”) under the Commission’s new

financial reporting rules.

I.

Background

On September 19, 2019 the Commission approved rules setting forth financial reporting

requirements with a compliance date of October 6, 2021(“Final Rules”) 2. Under the Final

Rules, the Commission requires limited financial reporting for SBS Entities subject to capital

requirements of a prudential regulator (“Bank SBS Entities”), as these SBS Entities are already

subject to existing financial reporting requirements by their prudential regulators. Such Bank

SBS Entities are required to submit reports in accordance with SEC Rule 18a-7 (“FOCUS Part

IIC”), which is intended to be aligned with FFIEC Form 031, “Consolidated Reports of

Condition and Income for a Bank with Domestic and Foreign Offices” (the “Call Report”).

1

SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the

U.S. and global capital markets. On behalf of our industry’s nearly 1 million employees, we advocate on legislation,

regulation and business policy, affecting retail and institutional investors, equity and fixed income markets and

related products and services. We serve as an industry coordinating body to promote fair and orderly markets,

informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for

industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S.

regional member of the Global Financial Markets Association (GFMA). For more information, visit

http://www.sifma.org.

2

See Recordkeeping and Reporting Requirements for [SBSDs], Major Security-Based Swap Participants, and

Broker-Dealers, 17 CFR Parts 200, 240, and 249, 84 FR 68550, 68733 (Dec. 16, 2019).

These reports are required quarterly, beginning with the end of the first fiscal quarter after the

October 6, 2021 compliance date, and due within 30 calendar days of the end of the Bank SBS

Entity’s fiscal quarter.

For SBS Entities that are not broker-dealers and not subject to capital requirements of a

prudential regulator (“Nonbank SBS Entity”), the Commission requires unaudited financial

statements as of the date that is six months after the date of the most recent audited statements

filed with the Commission under Rule 18a-7(c)(1) to be made publicly available on the Nonbank

SBS Entity’s website within 30 calendar days of the date of the unaudited statements.

As discussed at greater length below, the Final Rules present two issues: (1) for US Bank

SBS Entities, the submission deadlines were misaligned with US prudential regulators’ current

Call Report requirements and (2) for Nonbank SBS Entities, the website posting deadlines are

misaligned with the Commission’s own FOCUS Report and quarterly public reporting deadlines.

II.

Discussion

Below we describe the issues raised by the two categories of issues described above and

the Staff position we would propose to address them.

A.

U.S. Bank SBS Entity Requirements – Alignment of Submission Deadline

The Final Rules set the deadline for US Bank SBS Entity reporting for 30 days after

quarter end, while the prudential regulators’ Call Report deadline for US banks with foreign

branches is 35 days. Bank SBS Entities that have designed systems and procedures to report Call

Report information with their applicable prudential regulator within 35 calendar days of the

quarter end would face unnecessary burdens. For this reason, the CFTC has a similar inadvertent

misalignment in its rules which it has addressed via no action position.

Request: We request that the Division confirm that it would not recommend enforcement

action to the Commission if a US Bank SBS Entity made its Rule 18a-7(a)(2) financial filing

within the timeframe required to file the Call Report with its prudential regulator (e.g., within 35

calendar days after the end of its fiscal quarter if the US Bank SBS Entity had a foreign branch).

B.

Timing of Unaudited Financial Report Posting

SEC Rule 18a-7(b)(2) requires a Nonbank SBS Entity to make publicly available on its

website unaudited financial statements as of the date that is six months after the date of the most

recent audited statements filed with the Commission under Rule 18a-7(c)(1) within 30 calendar

days of the date of the unaudited statements. This contrasts with the Commission’s 65-day

deadline for broker-dealers.

While the proposing release justified the shorter period for SBS Entities vs broker-dealers

being appropriate because posting on a website, as would be required for SBS Entities, takes less

time than mailing, as is required for broker-dealers, that does not address the core challenge.

The 30-day deadline is unduly burdensome because it comes before an SBS Entity’s parent

company is required to complete and submit Commission required audited financials in its 10-Q

filing. Although unaudited, the midyear statement of financial condition must have a full set of

2

footnotes - at a time when an SBS Entity’s financial staff’s primary focus will be the parent

company’s 10-Q filing. A timeframe of 55 days to post unaudited financials would give firms

time beyond the 10-Q deadline, but give also less time than broker-dealers, who have to furnish

certain information to each customer (instead of simply posting it on a website as required by

SEC Rule 18a-7(b)(2)).

Request: We request that the Division confirm that it would not recommend enforcement

action to the Commission if a Nonbank SBS Entity made public its unaudited midyear financials

within 55 days of the date of the statements.

*

*

*

SIFMA appreciates your consideration of these important matters. If we may provide

further information, please do not hesitate to contact the undersigned.

Sincerely,

Kyle Brandon

Managing Director, Head of Derivatives Policy

SIFMA

3