Reporting Compliance

Compliance with Reporting Obligations

Status: SEC APPROVED RULES 2.1.25 Last Updated: 02 Jan 2025

FINRA proposed to adopt, as modified by Partial Amendment No. 1, proposed Rule 6530(c) (Compliance with Reporting Obligations) to implement provisions regarding Covered Persons’ ongoing reporting obligations and the use of third parties in meeting Exchange Act Rule 10c-1a and FINRA 6500 Rule Series obligations.

Specifically, proposed Rule 6530(c)(1) provides that Covered Persons (other than Covered Persons that engage a Reporting Agent) have an ongoing obligation to report Initial Covered Securities Loans and Loan Modifications to FINRA timely, accurately, and completely.

In addition, a Covered Person may employ an agent for the purpose of submitting loan information to SLATE; however, unless the Covered Person has retained a Reporting Agent as permitted under Exchange Act Rule 10c-1a, the primary responsibility for the timely, accurate, and complete reporting of loan information to SLATE remains the non-delegable duty of the Covered Person with the reporting obligation.

FINRA proposed to adopt, as modified by Partial Amendment No. 1, proposed Rule 6530(c) (Compliance with Reporting Obligations) to implement provisions regarding Covered Persons’ ongoing reporting obligations and the use of third parties in meeting Exchange Act Rule 10c-1a and FINRA 6500 Rule Series obligations.

Specifically, proposed Rule 6530(c)(1) provides that Covered Persons (other than Covered Persons that engage a Reporting Agent) have an ongoing obligation to report Initial Covered Securities Loans and Loan Modifications to FINRA timely, accurately, and completely.

In addition, a Covered Person may employ an agent for the purpose of submitting loan information to SLATE; however, unless the Covered Person has retained a Reporting Agent as permitted under Exchange Act Rule 10c-1a, the primary responsibility for the timely, accurate, and complete reporting of loan information to SLATE remains the non-delegable duty of the Covered Person with the reporting obligation lending reporting requirements of Rule 10c-1a and proposed FINRA Rule 6530 on its behalf.

Originally proposed Rule 6530(d)(3)51 would have provided that a member relying on a Reporting Agent has an obligation under FINRA Rule 3110 (Supervision) to take reasonable steps to ensure that the Reporting Agent is complying with Rule 10c-1a and FINRA Rule 6530 on its behalf. Partial Amendment No. 1 removed this proposed requirement.

FINRA also stated that nothing in the Proposal modifies the parameters the Commission set forth regarding the use of a “reporting agent,” which is a defined term under Rule 10c-1a(j), for purposes of reporting loan information pursuant to Rule 10c-1a. FINRA stated that, while the Commission established the role of a reporting agent (in the Rule 10c-1a Adopting Release), it did not preclude firms from using other types of third parties to facilitate reporting (albeit that covered persons may not rely on such other parties in the same manner reserved for reporting agents under Rule 10c-1a).

The Commission agrees with FINRA that the Proposal does not, and cannot, modify Rule 10c-1a’s definition of “reporting agent.” In adopting the definition of “reporting agent” under Rule 10c-1a, the Commission stated that the definition strikes a balance between increasing participation and competition in the marketplace for such services, while applying the definition only to entities over which the Commission has direct oversight.

The ability to use a Reporting Agent does not prevent Covered Persons from contracting privately with third-party vendors to assist in reporting. The use of other third-party vendors that are not Reporting Agents would not relieve a Covered Person of its obligation to report Rule 10c-1a information to FINRA, as reliance on a Reporting Agent would.

Allowing clearing agencies, as well as brokers or dealers, to act as reporting agents under Rule 10c-1a should help facilitate low-cost service providers, introduce more competition, and not unduly restrict the market for Reporting Agent services to only brokers or dealers.

Reporting Obligation & Reportable Security not entered into SLATE

Status: SEC APPROVED RULES 2.1.25 Last Updated: 02 Jan 2025

Commenters on the proposed rule change addressed Rule 6530(c)(3), which requires, among other things, that, if a Covered Person makes a good faith determination that it has a reporting obligation under Rule 10c-1a and the Rule 6500 Series, the Covered Person or Reporting Agent, as applicable, must report the Covered Securities Loan as provided in proposed Rule 6530, and if a Reportable Security is not entered into the SLATE system, the Covered Person or Reporting Agent, as applicable, must promptly notify and provide FINRA Operations, in the form and manner required by FINRA, the information specified in Rule 6530(a)(2)(A) and (B), along with such other information as FINRA deems necessary to enter the Reportable Security for reporting through SLATE.

In response, FINRA stated that, under Rule 10c-1a, it is the covered person’s (or, where applicable, a reporting agent’s) responsibility to ensure that it submits required reports in compliance with applicable rules; Rule 10c-1a does not assign to an RNSA the responsibility to identify all reportable securities.

FINRA stated that, as FINRA typically does with its other over-the-counter facilities, FINRA intends to create a SLATE security list that it will make available to Covered Persons and other SLATE participants (leveraging reference data from the CAT NMS list, TRACE, and the MSRB).

FINRA stated, however, that a Covered Person remains obligated to determine whether a securities loan transaction that it has engaged in is reportable under Rule 10c-1a, regardless of whether the security appears on FINRA’s SLATE security list.

FINRA stated that, for this reason, proposed Rule 6530(c)(3), as modified by Partial Amendment No. 1, requires that, if a Covered Person makes a good faith determination that it has a reporting obligation under Rule 10c-1a with respect to a securities loan, and the Reportable Security is not already entered into the SLATE system, the Covered Person (or its Reporting Agent) must promptly notify FINRA and work with FINRA Operations to enter the Reportable Security into the SLATE system.

FINRA’s decision to require Covered Persons or Reporting Agents, as applicable, to promptly notify and provide FINRA Operations with a Reportable Security that is not entered into the SLATE system is reasonable.

In proposing Rule 6530(c)(3), FINRA stated that the requirement would enable FINRA to set the security up in its systems and facilitate reporting of the Covered Securities Loan to SLATE, as required by Rule 10c-1a and proposed Rule 6530.

The proposed requirement to add Reportable Securities to the SLATE system is reasonably designed to facilitate the collection of loan information consistent with Rule 10c-1a.

Reportable Security not entered into the SLATE system

Status: SEC APPROVED RULES 2.1.25 Last Updated: 02 Jan 2025

As modified by Partial Amendment No. 1, proposed Rule 6530(c)(3)52 would provide that, if a Covered Person makes a good faith determination that it has a reporting obligation under Rule 10c-1a,53 the Covered Person or Reporting Agent, as applicable, must report the Covered Securities Loan as provided in proposed Rule 6530.

If the Reportable Security is not entered into the SLATE system, proposed Rule 6530(c)(3) would also require the Covered Person or Reporting Agent, as applicable, to promptly notify and provide FINRA Operations, in the form and manner required by FINRA, the information specified in Rule 6530(a)(2)(A) and (B), along with such other information as FINRA deems necessary to enter the Reportable Security for reporting through SLATE.

FINRA stated that this requirement would enable FINRA to set the security up in its systems and facilitate reporting of the Covered Securities Loan to SLATE, as required by Rule 10c-1a and proposed Rule 6530.

Notes and Examples:

Status: TO BE REVIEWED Last Updated: 04 Jun 2025

Questions?

1. Does the security require full set up on the SLATE system prior to submitting reports?

   1. Answer: Yes

2. Is it feasible to report first then wait for the security to be set up or would this type of report be rejected by SLATE?

   1. Answer: No, the security must be set up first.

3. The SEC 10c-1a rule specifies that a reportable security is any for which information is reported or required to be reported to the consolidated audit trail as required by ‘Rule 613’ of the Exchange Act and the CAT NMS Plan (“CAT”), the FINRA Trade Reporting and Compliance Engine (“TRACE”) or the Municipal Securities Rulemaking Board’s (“MSRB”) Real-Time Reporting Systems (“RTRS”), or any that replaces one of these systems.   

   1. For CAT reportable securities, the CAT NMS Reference data list is published on the FINRA website and is updated multiple times a day. 

   2. Clarification is therefore requested from FINRA on the version that firms are expected to use to determine reportable securities daily.

   3. Regardless if the security is not on the list, it could still be a reportable security.

      1. The rules state this is on the covered person to set this up at FINRA.

   4. Why can FINRA not check the CAT, TRACE and MSRB lists?

      1. The RNSA does not manage what’s reportable or not.

Reporting Agent Compliance

Status: SEC APPROVED RULES 2.1.25 Last Updated: 02 Jan 2025

Partial Amendment No. 1 removed from the proposed rule change the requirement that a Covered Person take reasonable steps to ensure that the Reporting Agent is in fact complying with the securities lending reporting requirements of Rule 10c-1a.

In doing so, FINRA stated that, in its oversight of member compliance with Rule 10c-1a, in addition to reviewing whether members have complied with the requirements of Rule 10c-1a(a)(2) with respect to the use of Reporting Agents, FINRA also will review the timeliness and accuracy of SLATE reports submitted by Reporting Agents in light of a Reporting Agent’s obligations under Rule 10c-1a(b) and the underlying requirements of Rule 10c-1a.

FINRA stated that, after gaining experience with the SLATE program, FINRA will re-evaluate whether any additional measures are appropriate. Any such efforts would be subject to a separate proposed rule change filed with the Commission and subject to notice and comment.

Reporting Agent, Service Bureaus and Self Reporting

Notes and Examples:

Status: TO BE REVIEWED Last Updated: 02 Jan 2025

1. There are a number of flavours of how to report to the SLATE system under 10c-1a being:

   1. Using a Reporting Agent, so this could be, PLATFORM PROVIDER 1, who would be registered with FINRA (RNSA) in order to be labelled a Reporting Agent

      1. There are multiple choices of Reporting Agents

   2. A covered person can actually report directly to SLATE

   3. A covered person can go via what’s called a Service Bureau

      1. Service Bureaus are not registered with FINRA, an example of a Service Bureau this would be PLATFORM PROVIDER 2 who are not registered with FINRA (RNSA)

2. MPID – Market Participant ID:

   1. If Reporting Party is a reporting agent: the Reporting Agent’s Market Participant Identifier MPID.

   2. If the Covered Person is self–reporting, then the Covered Person’s own MPID. 

   3. If a service bureau is reporting for the Covered Person, provide the Covered Person’s MPID. 

   4. If a service bureau is reporting for a Reporting Agent, provide the Reporting Agent’s MPID.