On May 1, 2024, the Financial Industry Regulatory Authority (FINRA) proposed a new series of rules—FINRA Rule 6500 Series—regarding reporting of securities lending transactions pursuant to the requirements under new Rule 10c-1a under the Securities Exchange Act of 1934 which the SEC adopted on October 13, 2023. Rule 10c-1a requires “covered persons” to report specified information about “covered securities loans” (as these terms are defined in Rule 10c-1a) to FINRA by the end of the day on which a loan is made or modified, in accordance with rules that FINRA is required to adopt by May 2, 2024 and that detail the format and manner by which the loan information is reported. Rule 10c-1a defines a covered person as (1) any person that agrees to a covered securities loan on behalf of a lender (i.e., an intermediary), other than a clearing agency; (2) any person that agrees to a covered securities loan as the lender when an intermediary is not used; or (3) a broker or dealer when borrowing fully paid or excess margin securities. Rule 10c-1a also specifies the securities loan information that FINRA is required to make publicly available and the information it is required to keep confidential.
The proposed FINRA Rule 6500 Series sets forth additional details regarding the format and manner of reporting securities loan information, expands upon the information that must be reported, establishes the Securities Lending and Transparency Engine (SLATE™)—an automated system developed by FINRA that will accommodate the reporting and dissemination of securities loan information, and sets forth how FINRA will report securities loan information required to be made public.
The SEC solicited public comments, which were due on May 28, 2024, on the proposed FINRA Rule 6500 Series, including whether the proposal is consistent with the Exchange Act. The proposed FINRA Rule 6500 Series is required to take effect by January 2, 2025. Covered persons must begin reporting securities lending information required by Rule 10c-1a and the FINRA Rule 6500 Series to FINRA starting on January 2, 2026. FINRA must begin reporting the information required to be made public by April 2, 2026.
The proposed FINRA Rule 6500 Series and the SEC’s request for comment are available here. An article published by attorneys in Vedder Price’s Investment Services group that summarizes new Rule 10c-1a is available here.
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