Securities Loans & Borrowings, Customer Protection & Callable Securities

SIFMA provides comments to the Securities and Exchange Commission (SEC) on a proposal to adopt three new Financial Industry Regulatory Authority (FINRA) rules:

1.  Proposed FINRA Rule 4314 (Securities Loans and Borrowings), setting forth requirements applicable to a member firm that is party to an agreement for the loan or borrowing of securities;
2.  Proposed FINRA Rule 4330 (Customer Protection – Permissible Use of Customers’ Securities), 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; and
3.  Proposed FINRA Rule 4340 (Callable Securities), setting forth obligations applicable to any callable securities a member firm has in its possession or control (collectively, the Proposed Rules).

While appreciative of the modifications and clarifications FINRA made in the Proposal particularly those in response to SIFMA’s previous comments on March 8, 2010, SIFMA identifies additional areas of concern and possible confusion in the Proposal. In light of this, SIFMA offers further recommendations primarily designed to address these areas and request from FINRA additional clarification as needed in advance of finalizing the Proposed Rules.