Implementing the SEC’s Securities Lending Reporting Requirements
By Robert Cook, FINRA President and CEO
In October 2023, the SEC adopted Rule 10c-1a, which is intended to enhance transparency in the securities lending market. In effect, the rule requires market participants to report securities lending transactions to FINRA, and requires FINRA to adopt rules establishing a system to facilitate such reporting and to publicly disseminate specified reported loan information. Earlier this month, the SEC approved the required FINRA rules.
Rule 10c-1a mandates that FINRA now move forward with operationalizing the new reporting system and that reporting of securities lending transactions begin on January 2, 2026. To meet this deadline—absent guidance from the SEC to the contrary—FINRA must take several steps, including publishing a Regulatory Notice announcing SEC approval of the FINRA rules, issuing separate technical specifications for reporting to the system, and building and testing the system itself.
I have asked FINRA staff to seek from the SEC an appropriate extension of the January 2, 2026, implementation deadline. Among other considerations, testing and launching a significant new reporting system that is heavily technology dependent at the turn of the calendar year could present unnecessary risks and challenges for the orderly rollout of the system. For example, many firms impose “freezes” on noncritical changes to IT systems during this time, and it can be unduly burdensome to ensure the availability of key personnel over a common holiday period. The new deadline also should take into account other relevant compliance dates applicable to persons subject to Rule 10c-1a.
Beyond this extension request, we separately will be asking the SEC to consider revisiting certain operational requirements under Rule 10c-1a in light of what has been learned since the Rule’s adoption. As is to be expected for a complex reporting and disclosure system, new issues have emerged—and existing issues have become better understood—as FINRA and the industry have begun unpacking the technical details of the Rule. FINRA was able to work with the SEC to address some of these issues when finalizing FINRA’s rules, and we appreciate market participants’ comments and engagement to help us do so. Other issues, however, could not be addressed in the FINRA rulemaking process because they relate to SEC requirements under Rule 10c-1a, with which FINRA is required to comply.
For example, we suggest extending the time between when transaction reporting first begins and when the public dissemination of reported information must occur. The SEC’s implementation timeline for Rule 10c-1a currently requires that public dissemination occur within 90 calendar days of the launch of transaction reporting. Additional time would better enable the SEC and FINRA to review the information that has been reported and consider whether adjustments to the data dissemination requirements are appropriate to avoid unintended consequences arising from such dissemination.
Other technical elements of Rule 10c-1a’s reporting requirements also may merit further consideration. As one example, some market participants have suggested that when investors lend securities in their portfolios through a securities lending agent, that lending agent should be permitted to report loans at the omnibus loan level (rather than sub allocations) to reduce operational complexity while providing publicly disseminated data that better reflects the key economic terms between the parties.
These and other operational issues and interpretive questions that have surfaced in connection with the implementation of Rule 10c-1a are worth further review to determine whether the transaction reporting requirements can be enhanced and reporting burdens reduced without compromising the SEC’s overarching transparency objectives. FINRA looks forward to further engagement with the SEC, member firms, trade associations, and other market participants in preparing requests for further guidance from the SEC regarding Rule 10c-1a.