Security-Based Swap Valuation Dispute Notices

Staff Statement on Submitting Security-Based Swap Valuation Dispute Notices

The Division of Trading and Markets has prepared the following on submitting security-based swap valuation dispute notices. These statements represent the views of the staff of the Division of Trading and Markets. They are not a rule, regulation, or statement of the Commission. The Commission has neither approved nor disapproved this content. These statements, like all staff statements, have no legal force or effect: they do not alter or amend applicable law, and they create no new or additional obligations for any person.

Rule 15Fi-3 under the Securities Exchange Act of 1934 (“Exchange Act”) requires each security-based swap dealer (“SBSD”) and each major security-based swap participant (“MSBSP”) (each SBSD and each MSBSP hereafter referred to as an “SBS Entity” and together referred to as “SBS Entities”) to reconcile outstanding, uncleared security-based swaps with their counterparties on a periodic basis and to resolve any discrepancies identified during such reconciliation exercises during specified timeframes set forth in the rule. That rule also contains a reporting requirement.

Specifically, Rule 15Fi-3(c) requires each SBS Entity to promptly notify the Commission of any security-based swap valuation dispute in excess of $20,000,000 (or its equivalent in any other currency) if not resolved within: (1) three business days, if the dispute is with a counterparty that is an SBS Entity; or (2) five business days, if the dispute is with a counterparty that is not an SBS Entity. Rule 15Fi-3(c) also requires SBS Entities to notify the Commission, in a form and manner acceptable to the Commission, and any applicable prudential regulator, if the amount of any security-based swap valuation dispute that was the subject of a previous notice increases or decreases by more than $20,000,000 (or its equivalent in any other currency), at either the transaction or portfolio level. 

In advance of the compliance date of Rule 15Fi-3(c), which is October 6, 2021, Commission staff has made available options for submitting security-based swap valuation dispute notices, as described below.

Options for Submitting Notices Under Rule 15Fi-3(c)

Commission staff has made available two alternative options for satisfying the requirements in Rule 15Fi-3(c), both of which involve submitting a security-based swap valuation dispute notice as a PDF attachment.

The first option is to submit the notice using the Commission’s Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”). As of September 20, 2021, EDGAR now includes two new form types, SBS DISPUTE NOTICE (for filing an initial submission of a dispute) and SBS DISPUTE NOTICE/A (for filing an amendment for a previously-submitted dispute). Instructions for submitting both form types are now included in the updated EDGAR Filer Manual, Volume II: “EDGAR Filing,” Version 59 (September 2021). Under this option, the submission process consists almost entirely of attaching and submitting a PDF document containing information about the security-based swap valuation dispute. For the SBS DISPUTE NOTICE/A, SBS Entities will need to enter the file number of the initial submission.

The second option is to submit the notice by email to a dedicated email address. That email address is SBSDISPUTENOTICES@sec.gov. Similar to the EDGAR option, SBS Entities should include the actual notice as a PDF attachment to the email. When submitting an amendment to a previously-filed notice, the email should include all information necessary to allow staff to identify the initial notice.

Contents of Notices

Under both options, the actual notice should consist of a PDF document, either as an attachment to the applicable EDGAR form type or to an email. In terms of the contents of the notice, the Commission explained when it adopted Rule 15Fi-3(c) that the notice is not required to include specific fields, “in order to provide SBS Entities with the flexibility to submit the required information to the Commission in a manner that is most efficient for each SBS Entity.” However, SBS Entities are encouraged to include, in the notice, basic information about the security-based swap valuation dispute, including: (1) identifying information about both counterparties (including each party’s Legal Entity Identifier); (2) the date of the dispute (or the termination date, if applicable); (3) the type of dispute; (4) disclosure about which counterparty is the receiver and which is the payer; and (5) the disputed amount, in U.S. Dollars (“USD”). SBS Entities are also encouraged to provide any applicable identifier about the relevant security-based swap (such as the product ID), the notional amount of the security-based swap, and disclosure about which counterparty is calling the dispute (i.e., the direction of the dispute).

Any SBS Entity with questions about the submission of security-based swap valuation dispute notices is encouraged to contact the staff at derivativespolicy@sec.gov or +1 (202) 551-5870.