- within Government and Public Sector topic(s)
The SEC designated FINRA as the organization to which all security-based swap dealers ("SBSDs") (including non-broker-dealer SBSDs) and major security-based swap participants (collectively, "security-based swap entities" or "SBSEs") must file their respective Form X-17a-5 reports ("FOCUS Reports").
The SEC stated that FOCUS Reports, which are reports used to submit financial and operational information, should be filed with FINRA, since it is equipped to handle such reports from stand-alone SBSEs and bank SBSEs. According to the SEC, FINRA is able to (i) offer a "consolidated platform" for stand-alone SBSEs and bank SBSEs to file FOCUS Reports, (ii) facilitate services necessary for such filings and (iii) subsequently transfer data from the FOCUS Reports to the SEC.
Commentary
The SEC designation does not indicate that FINRA will have a substantive role in reviewing FOCUS Reports submitted by non-broker-dealer SBSDs. (The Order focuses on the electronic system used by FINRA and the efficiency of using it for all SBSDs, since broker-dealer SBSDs are already required to use it.)
The open question about SEC security-based swap ("SBS") regulation is what role FINRA will have. At this time, FINRA rules have been largely deemed inapplicable to SBSs, but at some point the SEC will need to consider (i) as to entities otherwise members of FINRA, to what extent those rules should apply to SBS activities (particularly given that SBSs are also "securities") and (ii) as to non-FINRA members, what role (if any) FINRA will have, given that such firms (primarily banks) are not required to become members of FINRA and it is not clear whether, as a statutory matter, FINRA would be able to exercise even delegated authority over such firms.
Originally published 19 May 2020
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.