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New SEC rule adopted to boost transparency in securities lending market

On Behalf of | Oct 16, 2023 | Securities and Compliance

The Securities and Exchange Commission announced that it has adopted a new rule that is aimed at promoting transparency in the securities lending market.

Under the measure, Rule 10c-1a,  certain confidential information will be required to be reported to a registered national securities association (RNSA) to enhance the association’s oversight and enforcement functions.  Lenders will have to report loan data by the end of each trading day, including the names of the parties of the loan and further detail about sourcing strategies for the loan as well as the use of the loan.

In addition, an RNSA will be required to make certain information it receives available to the public, including daily data pertaining to the aggregate transaction activity and distribution of loan rates for each reportable security. Currently the only RNSA is the Financial Industry Regulatory Authority.

FINRA will make available information about the loan generally on the next trading day. That information will include when the loan was made, the collateral used, and pricing information such as the loan’s rate.

The SEC said transparency in this area will help ensure market participants have access to comprehensive and timely information.

“Securities lending played a role in the 2008 financial crisis, and, currently, the securities lending market is opaque,” said SEC Chair Gary Gensler. “In the Dodd-Frank Act, Congress mandated that the Commission enhance the transparency of the securities lending market. Such transparency gets to the heart of the SEC’s mission. It promotes competition. It promotes fair, orderly, and efficient markets. In fulfilling Congress’s mandate, today’s adoption will promote greater transparency in the securities lending markets both to regulators and the public.”

The adopting release will be published in the Federal Register and the final rule will become effective 60 days after publication in the register.

The attorneys at Lewitas Hyman were formerly senior attorneys in the SEC’s Division of Enforcement. We have also represented clients in regulatory matters while working at Morgan Stanley and in private practice at some of the world’s largest law firms. Therefore, we understand the complexities that come with being the subject of a regulatory inquiry, and we have the experience to guide and advise you through any type of regulatory investigation. If you are the subject of a regulatory proceeding, contact Lewitas Hyman at (888) 655-6002 or through our online contact form for a free consultation.