Securities Loans & Borrowings, Securities of Customers & Callable Securities

SIFMA provides comments to the Financial Industry Regulatory Authority (FINRA) three proposed consolidated rules discussed in FINRA Regulatory Notice 10-03:

The proposed three consolidated rules discussed are:

1. Proposed FINRA Rule 4330 – setting forth requirements applicable to a member firm’s borrowing or lending of a customer’s margin securities that are eligible to be pledged or loaned;
2. Proposed FINRA Rule 4314 – setting forth requirements applicable to a member firm that is party to an agreement for the loan or borrowing of securities; and
3. Proposed FINRA Rule 4340 – setting forth obligations applicable to any callable securities a member firm has in its possession or control.

SIFMA supports FINRA’s goals of enhancing the current safeguards within the securities lending market to further address investor protection concerns, and promote the fundamental goal of lenders – incremental income with limited risk. At the same time, SIFMA also is cognizant of the need to mitigate any confusion or unintended consequences associated with FINRA’s proposed requirements.  SIFMA offers recommendations primarily designed to address these aspects, and raise certain interpretive issues that SIFMA believes should be clarified by FINRA in its rule filing to the Commission.