Reporting Obligation & Reportable Security not entered into SLATE

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• Reporting Obligation & Reportable Security not entered into SLATE

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.