Electronic Submission of Certain Material – BD/SBSD Audited Financial and BD Risk Report Requirements

Summary

SIFMA provided comments to the U.S. Securities and Exchange Commission (SEC) to highlight critical concerns about certain requirements included in the Electronic Submission of Certain Material Under the Securities Exchange Act of 1934; Amendments Regarding the FOCUS Report (“Final Rule”).

Excerpt

The Securities Industry and Financial Markets Association ¹ (“SIFMA”) is writing to highlight critical concerns about certain requirements included in the U.S. Securities and Exchange Commission’s (“SEC” or Commission”) Electronic Submission of Certain Material Under the Securities Exchange Act of 1934; Amendments Regarding the FOCUS Report (“Final Rule”). ² Following up discussions with staff, we are providing additional comments related to the submission of broker-dealer (“BD”) and securities-based swap dealer (“SBSD”) (together, “Covered Entities”) audited annual financial reports (“Audited Annual Reports”) and BD risk reports (“Risk Reports”) (together, “Covered Reports”) to highlight significant shortcomings in the Final Rule specific to these reports. We have critical concerns with other requirements, which we have and will continue to comment on via separate submissions and look forward to discussing those concerns with staff and the Commission in due course. ³

Background

In early 2023 the Commission approved a proposed rulemaking covering a very broad number of different types of forms, filings and submissions that are required to be filed with or submitted to the Commission under the Securities and Exchange Act of 1934 and related rules and regulations thereunder (“Proposed Rule”).4 Among many proposed requirements, the Proposed Rule would require the electronic filing or submission on the Commission’s Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”) system, using structured data for certain materials, framed as part of the Commission’s effort to modernize its information collection and analysis methods.

In our comment letter submitted on May 22, 2023,5 SIFMA expressed its support for modernizing the document submission process for broker-dealers, over-the-counter (“OTC”) derivatives dealers and SBSDs, and improving the utility and functionality of the forms and their data for the Commission, market participants, and dealers. These included, for example, updates to FOCUS reports which had been the subject of significant and productive discussions between staff and industry aimed at achieving these shared goals.

At the same time, however, we noted strong concerns with several requirements that would impose significant costs and burdens on market participants without providing a clear benefit. Further, we described many cases where there are mechanisms to achieve the Commission’s objectives that would be substantially less costly and burdensome for firms than those proposed. In addition, some aspects of the Proposed Rule, such as the requirement to submit fillable web forms on EDGAR in lieu of PDFs, would undermine the Proposed Rule’s goals by introducing inefficiencies and opportunities for human error.