New supplemental liquidity schedule established by FINRA

On Behalf of | Sep 10, 2021 | FINRA Compliance

The Financial Industry Regulatory Authority announced the establishment of a new Supplemental Liquidity Schedule, effective March 1, 2022. FINRA implemented the schedule (SLS) as a measure intended to improve its ability “to monitor for events that signal an adverse change in the liquidity risk of the members with the largest customer and counterparty exposures.”

The SLS will be required to be filed by each carrying member with $25 million or more in free credit balances, as outlined under the Securities Exchange Act of 1934 (SEA) Rule 15c3-3(a)(8). The schedule will also have to be filed by any member with at least $1 billion in aggregate outstanding repurchase agreements, securities loan contracts and bank loans, as reported on the member’s most recently filed Financial and Operational Combined Uniform Single (FOCUS) report. The FOCUS reports demonstrate the financial position of each firm and its ability to maintain sufficient net capital.

Members subject to the new schedule will be required to complete their first SLS by the end of March 2022, and it will be due by May 4, 2022. It will have to be filed by members as a supplement to their FOCUS report.

The SLS was adopted by FINRA pursuant to Rule 4524, which states that along with the required FOCUS reports, “each member shall file such additional financial or operational schedules or reports as FINRA may deem necessary or appropriate for the protection of investors or in the public interest.”
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In announcing the new SLS, FINRA said effectively monitoring members’ liquidity and funding risks is an important priority of its financial supervision programs. The authority said the required information will allow it to assess firms’ ability to continue to fund their operations and meet their financial obligations.

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