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NOTICE OF MEMORANDUM OF UNDERSTANDING
CONCERNING COOPERATION AND THE EXCHANGE OF INFORMATION
RELATED TO THE SUPERVISION OF CROSS-BORDER COVERED ENTITIES



The Ontario Securities Commission, together with the Autorité des marchés financiers, Alberta Securities Commission and British Columbia Securities Commission, recently entered into a Memorandum of Understanding with the United States Commodity Futures Trading Commission concerning regulatory cooperation related to the supervision and oversight of regulated entities that operate in both the United States and Canada (the "Supervisory MOU"). The Supervisory MOU provides a comprehensive framework for consultation, cooperation and information-sharing related to the day-to-day supervision and oversight of cross-border regulated entities and enhances the OSC's ability to supervise these entities.

The Supervisory MOU is subject to the approval of the Minister of Finance. The Supervisory MOU was delivered to the Minister of Finance on March 26, 2014

Questions may be referred to:

Jean-Paul Bureaud
Director (Acting)
Office of Domestic and International Affairs
Tel: 416-593-8131
Email: jbureaud@osc.gov.on.ca

MEMORANDUM OF UNDERSTANDING

United States Commodity Futures Trading Commission And Alberta Securities Commission British Columbia Securities Commission Ontario Securities Commission Autorité des marchés financiers

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COOPERATION AND THE EXCHANGE OF INFORMATION RELATED TO THE SUPERVISION OF CROSS--BORDER COVERED ENTITIES

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March 25, 2014

MEMORANDUM OF UNDERSTANDING CONCERNING COOPERATION AND THE EXCHANGE OF INFORMATION RELATED TO THE SUPERVISION OF CROSS-BORDER COVERED ENTITIES

In view of the growing globalization of the world's financial markets and the increase in cross-border operations and activities of regulated entities, the United States Commodity Futures Trading Commission, the Alberta Securities Commission, the British Columbia Securities Commission, the Ontario Securities Commission, and the Autorité des marchés financiers (collectively, the "Authorities") have reached this Memorandum of Understanding ("MOU") regarding cooperation and the exchange of information in the supervision and oversight of regulated entities that operate on a cross-border basis in both (i) the United States and (ii) Alberta, British Columbia, Ontario, or Québec. This MOU does not preclude information sharing or cooperation with respect to persons that are not specifically defined as covered by this MOU but that nonetheless may be subject to regulatory requirements in the United States or in Alberta, British Columbia, Ontario, or Québec. The Authorities express, through this MOU, their willingness to cooperate with each other in the interest of fulfilling their respective regulatory mandates regarding derivatives and/or securities markets particularly in the areas of: protecting investors and customers; fostering the integrity of and maintaining confidence in financial markets; and reducing systemic risk.

ARTICLE ONE: DEFINITIONS

For purposes of this MOU:

1. "Authority" means:

a. In the United States, the Commodity Futures Trading Commission ("CFTC"); or

b. In Canada, the Alberta Securities Commission ("ASC"), the British Columbia Securities Commission ("BCSC"), the Ontario Securities Commission ("OSC"), the Autorité des marchés financiers ("AMF"), or any other Canadian securities regulatory authority or Canadian derivatives authority that may become a party to the MOU in the manner set out in Article Eight (individually, a "Canadian Authority", or collectively, the "Canadian Authorities").

2. "Requesting Authority" means an Authority making a request under this MOU.

3. "Requested Authority" means:

a. Where the Requesting Authority is the CFTC, the Canadian Authority to which a request is made under this MOU; or

b. Where the Requesting Authority is a Canadian Authority, the CFTC.

4. "Laws and Regulations" means the Commodity Exchange Act, Dodd-Frank Wall Street Reform and Consumer Protection Act, CFTC regulations, and other relevant requirements in the United States, and the securities acts and regulations applicable in the jurisdiction of each Canadian Authority, the Commodity Futures Act (Ontario) and related regulations, the Derivatives Act (Québec) and related regulations, and other relevant requirements in Canada and the jurisdiction of each Canadian Authority.

5. "Person" means a natural person, unincorporated association, partnership, trust, investment company, or corporation, and may be a Covered Entity or Cross-Border Covered Entity.

6. "Covered Entity" means a Person that is, or that has applied to be, authorized, designated, recognized, qualified, registered, supervised, or overseen by one or more of the Authorities pursuant to Laws and Regulations, and may include regulated markets and organized trading platforms, central counterparties, trade repositories, and intermediaries, dealers, or other market participants.

7. "Cross-Border Covered Entity" means:

a. A Covered Entity of both the CFTC and any one or more of the Canadian Authorities;

b. A Covered Entity in one jurisdiction that has been exempted from authorization, designation, recognition, qualification, or registration by an Authority in the other jurisdiction;

c. A Covered Entity in one jurisdiction that controls or is controlled by a Covered Entity located in the other jurisdiction; or

d. A Covered Entity in one jurisdiction that is physically located in the other jurisdiction.

For purposes of this MOU, references to jurisdiction will be determined as either the jurisdiction of the CFTC or the jurisdiction of one of the Canadian Authorities.

8. "Books and Records" means documents, electronic media, and books and records within the possession, custody, and control of, and other information about, a Cross-Border Covered Entity.

9. "Emergency Situation" means the occurrence of an event that could materially impair the financial or operational condition of a Cross-Border Covered Entity.

10. "On-Site Visit" means any regulatory visit to the premises of a Cross-Border Covered Entity for the purposes of ongoing supervision and oversight including the inspection of Books and Records.

11. "Local Authority" means the Authority in whose jurisdiction a Cross-Border Covered Entity that is the subject of an On-Site Visit is physically located.

12. "Visiting Authority" means the Authority conducting an On-Site Visit.

13. "Governmental Entity" means:

a. The U.S. Department of the Treasury or the U.S. Board of Governors of the Federal Reserve System, if the Requesting Authority is the CFTC;

b. The Federal Ministry of Finance, if the Requesting Authority is the ASC, BCSC, or OSC;

c. The Alberta Ministry of Treasury and Finance, if the Requesting Authority is the ASC;

d. The British Columbia Ministry of Finance, if the Requesting Authority is the BCSC;

e. The Ontario Ministry of Finance, if the Requesting Authority is the OSC;

f. The Québec ministère des Finances, if the Requesting Authority is the AMF; and

g. Such other entity, as agreed to in writing by the signatories, as may be responsible for any other Canadian Authority which may become a party to this MOU in the manner set out in Article Eight.

ARTICLE TWO: GENERAL PROVISIONS

14. This MOU is a statement of intent to consult, cooperate, and exchange information in connection with the supervision and oversight of Cross-Border Covered Entities. The cooperation and information sharing arrangements under this MOU should be interpreted and implemented in a manner that is permitted by, and consistent with, the legal requirements applicable to each Authority. With respect to cooperation pursuant to this MOU, no domestic secrecy or blocking laws or regulations should prevent an Authority from providing assistance to another Authority. The Authorities anticipate that cooperation primarily will be achieved through ongoing informal consultations, supplemented as needed by more formal cooperation, including through mutual assistance in obtaining information related to Cross-Border Covered Entities. The provisions of this MOU are intended to support both informal consultations and formal cooperation, as well as to facilitate the written exchange of non-public information in accordance with applicable laws.

15. This MOU does not create any legally binding obligations, confer any rights, or supersede domestic laws. This MOU does not confer upon any Person the right or ability directly or indirectly to obtain, suppress, or exclude any information or to challenge the execution of a request for assistance under this MOU.

16. This MOU is not intended to limit or condition the discretion of an Authority in any way in the discharge of its regulatory responsibilities or to prejudice the individual responsibilities or autonomy of any Authority. This MOU does not limit an Authority to taking solely those measures described herein in fulfillment of its supervisory functions. In particular, this MOU does not affect any right of any Authority to communicate with, conduct an On-Site Visit of (subject to the procedures described in Article Five), or obtain information or documents from any Person subject to its jurisdiction that is physically located in the jurisdiction of another Authority.

17. This MOU is intended to complement but does not alter, except where explicitly noted, the terms and conditions of the following existing arrangements:

a. The IOSCO Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (revised May 2012) ("IOSCO MMOU"), to which the Authorities are signatories, which covers primarily information sharing in the context of enforcement matters;

b. The Declaration on Cooperation and Supervision of International Futures Markets and Clearing Organizations (as amended March 1998) ("Declaration"), to which the CFTC, OSC, and Commission des valeurs mobilières du Québec ("CVMQ") are signatories;

c. The Memorandum of Understanding between the CFTC and the OSC (July 7, 1992) ("CFTC-OSC MOU");

d. The Memorandum of Understanding between the CFTC and the CVMQ (July 7, 1992) ("CFTC-CVMQ MOU"); and

e. The Financial Information Sharing Memorandum of Understanding between the CFTC and the OSC, CVMQ, and others (September 23, 1991) ("FISMOU").{1}

This MOU supersedes the Memorandum of Understanding Concerning Cooperation and the Exchange of Information Related to the Supervision of Cross-Border Clearing Organizations between the CFTC and the ASC (June 10, 2010) ("CFTC-ASC Clearing MOU"), and execution of this MOU serves as notice of termination of the CFTC-ASC Clearing MOU.

18. To facilitate cooperation under this MOU, the Authorities hereby designate contact persons as set forth in Appendix A, which may be amended from time to time by an Authority transmitting revised contact information to the other Authorities.

ARTICLE THREE: SCOPE OF SUPERVISORY CONSULTATION, COOPERATION, AND EXCHANGE OF INFORMATION

General

19. The Authorities recognize the importance of close communication concerning Cross-Border Covered Entities and intend to consult regularly, as appropriate, regarding:

a. General supervisory issues, including regulatory, oversight, or other related developments;

b. Issues relevant to the operations, activities, and regulation of Cross-Border Covered Entities; and

c. Any other areas of mutual supervisory interest.

20. The Authorities recognize in particular the importance of close cooperation in the event that a Cross-Border Covered Entity, particularly one whose failure likely would be systemically important to an Authority, experiences, or is threatened by, a potential financial crisis or other Emergency Situation.

21. Cooperation will be most useful in, but is not limited to, the following circumstances where issues of common regulatory concern may arise:

a. The initial application with the CFTC or a Canadian Authority for authorization, designation, recognition, qualification, or registration, or exemption therefrom, by a Covered Entity that is authorized, designated, recognized, qualified, or registered by an Authority in the other jurisdiction;

b. The ongoing supervision and oversight of a Cross-Border Covered Entity, including compliance with statutory and regulatory requirements in either jurisdiction or with international standards;

c. Regulatory or supervisory actions or approvals taken in relation to a Cross-Border Covered Entity by the CFTC or a Canadian Authority that may impact the operations of the entity in the jurisdiction of the other Authority; and

d. The provision and maintenance of direct access to information and data stored in Covered Entities that are trade repositories, where such information and data is provided by a Covered Entity and maintained pursuant to Laws and Regulations.

Event-Triggered Notification

22. As appropriate in the particular circumstances, the CFTC or the relevant Canadian Authority will endeavor to inform, respectively, the relevant Canadian Authority (or Authorities) or the CFTC promptly, and where practicable in advance, of:

a. Pending regulatory changes that may have a significant impact on the operations, activities, or reputation of a Cross-Border Covered Entity, including those that may affect the rules or procedures of a Cross-Border Covered Entity;

b. Any material event of which the Authority is aware that could adversely impact the financial or operational stability of a Cross-Border Covered Entity. Such events include any known adverse material change in the ownership, operating environment, operations, financial resources, management, or systems and controls of a Cross-Border Covered Entity, and the failure of a Cross-Border Covered Entity to satisfy any of its requirements for continued authorization, designation, recognition, qualification, or registration, or exemption therefrom, where that failure could have a material adverse effect in the jurisdiction of the other Authority. For a Cross-Border Covered Entity that is a central counterparty, such events also include a default or potential default of a clearing member firm or participant and market or settlement bank difficulties that might adversely affect the central counterparty;

c. The status of efforts to address any material financial or operating difficulties experienced by a Cross-Border Covered Entity as described in Subparagraph b; and

d. Enforcement actions or sanctions or significant regulatory actions, including the revocation, suspension, or modification of relevant authorization, designation, recognition, qualification, or registration, or exemption therefrom, concerning a Cross-Border Covered Entity.

23. The determination of what constitutes "significant impact", "material event", "adversely impact", "adverse material change", "material adverse effect", "market or settlement bank difficulties", "adversely affect", "material financial or operating difficulties", or "significant regulatory actions" for purposes of Paragraph 22 shall be left to the reasonable discretion of the relevant Authority that determines to notify the other Authority.

Request--Based Information Sharing

24. To the extent appropriate to supplement informal consultations, upon written request, the Requested Authority intends to provide the Requesting Authority the fullest possible cooperation subject to the terms in this MOU in assisting the Requesting Authority's supervision and oversight of Cross-Border Covered Entities, including assistance in obtaining and interpreting information that is relevant to ensuring compliance with the Laws and Regulations of the Requesting Authority and that is not otherwise available to the Requesting Authority. Such requests shall be made pursuant to Article Four of this MOU, and the Authorities anticipate that such requests will be made in a manner that is consistent with the goal of minimizing administrative burdens.

25. The information covered by Paragraph 24 includes:

a. Information relevant to the financial and operational condition of a Cross-Border Covered Entity, including, for example, financial resources, risk management, and internal control procedures;

b. Relevant regulatory information and filings that a Cross-Border Covered Entity is required to submit to an Authority including, for example, interim and annual financial statements and early warning notices; and

c. Regulatory reports prepared by an Authority, including, for example, examination reports, findings, or information contained in such reports regarding Cross-Border Covered Entities.

Periodic Meetings

26. Representatives of the Authorities intend to meet periodically, as appropriate, to update each other on their respective functions and regulatory oversight programs and to discuss issues of common interest relating to the supervision of Cross-Border Covered Entities, including: contingency planning and crisis management, systemic risk concerns, default procedures, the adequacy of existing cooperative arrangements, and the possible improvement of cooperation and coordination among Authorities. Such meetings may be conducted by conference call or on a face-to-face basis, as appropriate.

ARTICLE FOUR: EXECUTION OF REQUESTS FOR INFORMATION

27. To the extent possible, a request for information pursuant to Article Three should be made in writing (which may be transmitted electronically), and addressed to the relevant contact person identified in Appendix A. A request generally should specify the following:

a. The information sought by the Requesting Authority;

b. A general description of the matter that is the subject of the request;

c. The purpose for which the information is sought; and

d. The desired time period for reply and, where appropriate, the urgency thereof.

Information responsive to the request, as well as any subsequent communication among Authorities, may be transmitted electronically. Any electronic transmission should use means that are appropriately secure in light of the confidentiality of the information being transmitted.

28. In an Emergency Situation, the CFTC and the relevant Canadian Authority or Authorities will endeavor to notify the other(s) as soon as possible of the Emergency Situation and communicate information as appropriate in the particular circumstances, taking into account all relevant factors, including the status of efforts to address the Emergency Situation. During an Emergency Situation, requests for information may be made in any form, including orally, provided such communication is confirmed in writing as promptly as possible following such notification.

ARTICLE FIVE: ON--SITE VISITS

29. In fulfilling its supervision and oversight responsibilities and to ensure compliance with its Laws and Regulations, the CFTC may need to conduct On-Site Visits to a Cross-Border Covered Entity located in Alberta, British Columbia, Ontario, or Québec, and a Canadian Authority may need to conduct On-Site Visits to a Cross-Border Covered Entity located in the United States. Each Authority will consult and work collaboratively with the Local Authority in conducting an On-Site Visit.

30. An On-Site Visit by an Authority will be conducted in accordance with the following procedure:

a. The Visiting Authority intends to provide advance notice to the Local Authority of its intent to conduct an On-Site Visit and the intended timeframe for, and scope of, the On-Site Visit. Other than in exceptional circumstances, the Visiting Authority will notify the Local Authority prior to notifying the Cross-Border Covered Entity.

b. The Local Authority will endeavor to share any relevant reports, or information contained therein, related to examinations it may have undertaken of the Cross-Border Covered Entity.

c. The Authorities intend to assist each other regarding On-Site Visits, including providing information that is available prior to the On-Site Visit; cooperating and consulting in reviewing, interpreting, and analyzing the contents of public and non-public Books and Records; and obtaining information from directors and senior management of a Cross-Border Covered Entity.

d. The Authorities will consult with each other, and the Local Authority may in its discretion accompany or assist the other Authority during the On-Site Visit, or the Authorities may conduct joint visits where appropriate.

ARTICLE SIX: PERMISSIBLE USES OF INFORMATION

31. The Requesting Authority may use non-public information obtained under this MOU solely for the supervision and oversight of Cross-Border Covered Entities and seeking to ensure compliance with the Laws and Regulations of the Requesting Authority.

32. The Authorities recognize that, while this MOU is not intended to gather information for enforcement purposes, subsequently the Authorities may want to use the non-public information provided pursuant to this MOU for enforcement purposes. In cases where a Requesting Authority seeks to use non-public information obtained pursuant to this MOU for enforcement purposes, including in conducting investigations or taking enforcement action, treatment of the non-public information will be in accordance with the use and confidentiality provisions of the IOSCO MMOU.

33. Before using non-public information furnished under this MOU for any purpose other than those stated in Paragraphs 31 and 32, the Requesting Authority must first consult with and obtain the consent of the Requested Authority for the intended use. If consent is denied by the Requested Authority, the Authorities will consult to discuss the reasons for withholding approval of such use and the circumstances, if any, under which the intended use by the Requesting Authority might be allowed.

34. The restrictions in this Article do not apply to an Authority's use of information it obtains directly from a Cross-Border Covered Entity, whether during an On-Site Visit or otherwise. However, where non-public information is provided to the Requesting Authority pursuant to an information-sharing request pursuant to Article Four of this MOU, the restrictions in this MOU apply to the use of the information by that Requesting Authority.

ARTICLE SEVEN: CONFIDENTIALITY OF INFORMATION AND ONWARD SHARING

35. Except as provided in Paragraphs 36 and 37, each Authority will keep confidential, to the extent permitted by law, non-public information shared under this MOU, requests made under this MOU, the contents of such requests, and any other matters arising under this MOU.

36. As required by law, it may become necessary for a Requesting Authority to share non-public information obtained under this MOU with a Governmental Entity in its jurisdiction. In such circumstances and to the extent permitted by law:

a. The Requesting Authority intends to notify the Requested Authority; and

b. Prior to the Requesting Authority sharing the non-public information, the Requesting Authority will provide adequate assurances to the Requested Authority concerning the Governmental Entity's use and confidential treatment of the information, including, as necessary, assurances that:

i. The Governmental Entity has confirmed that it requires the information for a purpose within the scope of its jurisdiction; and

ii. The information will not be shared by the Governmental Entity with other parties without getting the prior written consent of the Requested Authority.

37. Except as provided in Paragraph 36, the Requesting Authority must obtain the prior written consent of the Requested Authority before disclosing non-public information received under this MOU to any non-signatory to this MOU. The Requested Authority will take into account the level of urgency of the request and respond in a timely manner. During an Emergency Situation, consent may be obtained in any form, including orally, provided such communication is confirmed in writing as promptly as possible following such notification. If consent is denied by the Requested Authority, the Requesting and Requested Authorities will consult to discuss the reasons for withholding approval of such disclosure and the circumstances, if any, under which the intended disclosure by the Requesting Authority might be allowed.

38. To the extent possible, the Requesting Authority intends to notify the Requested Authority of any legally enforceable demand for non-public information furnished under this MOU. When complying with the demand, the Requesting Authority intends to assert all appropriate legal exemptions or privileges with respect to such information as may be available.

39. The Authorities intend that the sharing or disclosure of non-public information, including deliberative and consultative materials, such as written analysis, opinions, or recommendations relating to non-public information that is prepared by or on behalf of an Authority, pursuant to the terms of this MOU, will not constitute a waiver of privilege or confidentiality of such non-public information.

ARTICLE EIGHT: AMENDMENTS

40. The Authorities will periodically review the functioning and effectiveness of the cooperation arrangements between the CFTC and the Canadian Authorities with a view, inter alia, to expanding or altering the scope or operation of this MOU should that be judged necessary. This MOU may be amended with the written consent of all of the Authorities referred to in Paragraph 1.

41. Any Canadian Authority may become a party to this MOU by executing a counterpart hereof together with the CFTC and providing notice of such execution to the other Canadian Authorities that are signatories to this MOU.

ARTICLE NINE: EXECUTION OF MOU

42. Cooperation in accordance with this MOU will become effective on the date this MOU is signed by the Authorities and on the date determined in accordance with applicable legislation in the case of the OSC and on the date signed after ministry approval in the case of the ASC.

ARTICLE TEN: TERMINATION

43. Cooperation in accordance with this MOU will continue until the expiration of 30 days after any Authority gives written notice to the other Authorities of its intention to terminate the MOU. If an Authority gives such notice, the parties will consult concerning the disposition of any pending requests. If an agreement cannot be reached through consultation, cooperation will continue with respect to all requests for assistance that were made under the MOU before the expiration of the 30-day period until all requests are fulfilled or the Requesting Authority withdraws such request(s) for assistance. In the event of termination of this MOU, information obtained under this MOU will continue to be treated in the manner prescribed under Articles Six and Seven.

44. If any Canadian Authority terminates the MOU in accordance with this Article, the MOU shall remain effective between the CFTC and the remaining Canadian Authorities.

This MOU is executed in quintuplicate, this 25th day of March 2014.

"Mark Wetjen"
"Howard Wetston"
Mark Wetjen
Howard I. Wetston, Q.C.
Acting Chairman
Chair
For the U.S. Commodity Futures Trading
For the Ontario Securities Commission
Commission
Date: March 20, 2014
Date: March 25, 2014
 
"William Rice"
"Louis Morisset"
William S. Rice, Q.C.
Louis Morisset
Chair and Chief Executive Officer
President and Chief Executive Officer
For the Alberta Securities Commission
For the Autorité des marchés financiers
Date: March 24, 2014
Date: March 24, 2014
 
"Brenda Leong"
Brenda Leong
Chair and Chief Executive Officer
For the British Columbia Securities Commission
Date: March 19, 2014

Appendix A

CONTACT PERSONS

In addition to the following contact information, the CFTC and Canadian Authorities will exchange confidential emergency contact telephone information.

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COMMODITY FUTURES TRADING COMMISSION
1155 21st Street, N.W.
Washington, DC
 
Attention:
Director, Office of International Affairs
 
Telephone:
202-418-5645
Fax:
202-418-5548
Email:
sjosephson@cftc.gov

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ALBERTA SECURITIES COMMISSION
Suite 600, 250-5th Street SW
Calgary, Alberta
T2P OR4
Canada
 
Attention:
General Counsel

 

Telephone:
403 297 4698
Fax:
403 355 4479
Email:
kari.horn@asc.ca

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BRITISH COLUMBIA SECURITIES COMMISSION
P.O. Box 10142, Pacific Centre
701 West Georgia
Vancouver, BC
V7Y 1L2
Canada
 
Attention:
Secretary to the Commission, and Executive Director

 

Telephone:
604 899 6534
604 899 6727

 

Fax:
604 899 6506
Email:
commsec@bcsc.bc.ca
pbourque@bcsc.bc.ca

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ONTARIO SECURITIES COMMISSION
20 Queen Street West
22nd Floor, Box C.P. 55
Toronto, ON M5H 3S8
 
Attention:
Director (Acting), Office of Domestic and International Affairs

 

Telephone:
(416) 593-8131
Email:
jbureaud@osc.gov.on

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AUTORITÉ DES MARCHÉS FINANCIERS
800, Square Victoria, 22e étage
C.P. 246, Tour de la Bourse
Montréal (Québec) H4Z 1G3
 
Attention:
Corporate Secretary
 
Telephone:
(514) 395-0337 ext. 2517
Fax:
(514) 864-6381
Email:
anne-marie.beaudoin@lautorite.qc.ca

{1} The AMF replaced the CVMQ, acquired the CVMQ's rights, and assumed the CVMQ's obligations under the Declaration, the CFTC-CVMQ MOU, and the FISMOU.