SEC's New Securities Lending Reporting Rule

In a significant regulatory update, the Securities and Exchange Commission (SEC) has adopted a new rule, known as Rule 10c-1a or the Securities Lending Rule.

This development, effective from October 2023, mandates the reporting of certain securities lending transactions, a move set to enhance market transparency and efficiency. Here's what alternative finance business funders need to know:

Key Highlights of the Rule:

1. Increased Transparency: The rule requires the daily reporting of loans involving "reportable securities" to a registered national securities association (RNSA), primarily the Financial Industry Regulatory Authority (FINRA). This measure aims to provide market participants with timely access to crucial pricing and transaction information.

2. Reportable Securities: A broad range of securities falls under the ambit of this rule, including equity, debt, and digital asset securities. Notably, this includes securities beyond U.S. exchange-traded and U.S. public company issuances.

3. Who Must Report: The rule applies to "covered persons," encompassing individuals or entities lending reportable securities, whether directly or through intermediaries, as well as brokers and dealers in certain circumstances.

4. Reporting Obligations: Required information includes details about the loaned security, the loan itself, the borrower, and associated collateral. Modifications to loan terms must also be promptly reported.

5. Public Access to Data: While certain data will be kept confidential, key information, excluding the loan amount, will be publicly accessible on the next business day following a report submission. The loan amount will be disclosed after 20 business days.

6. Implementation Timeline: The rule takes effect 60 days post-publication in the Federal Register, with a 24-month delay for the reporting requirement. RNSAs have four months from the effective date to propose implementation rules.

Implications for Our Industry:

• Risk Management: Enhanced transparency in securities lending can aid businesses in better assessing and managing market risks.

• Compliance Requirements: Entities involved in securities lending must align their reporting mechanisms to adhere to this new rule, ensuring timely and accurate data submission.

• Strategic Decision-Making: Access to comprehensive market data enables more informed decisions, impacting investment strategies and risk assessments.

Our Opinion:

We advise our readers to go beyond just following these new rules. Instead, actively use the data it provides for in-depth risk analysis and to make smarter strategic choices. Doing so will keep your business ahead in terms of industry practices and ethical conduct.

The new rule's requirement for detailed reporting of securities lending transactions will provide a wealth of data on market trends and borrower behaviors. This data can be leveraged to conduct more nuanced market risk assessments.

By analyzing the types of securities frequently lent out, the conditions of loans, and the profiles of borrowers, alternative finance professionals can identify potential risk patterns, contributing to more robust risk management strategies.

Take Advantage of the Power of Data to Drive Smarter & More Ethical Business Decisions

This is where the role of strategic partnerships becomes crucial, particularly with companies like Cobalt Intelligence.

With our expertise in AI automation and advanced data analysis, we provide the tools and insights needed to effectively interpret and utilize the wealth of data made available by the new rule.

This collaboration can empower your business to stay ahead in risk assessment and management, ensuring compliance while also fostering innovative and ethical financial practices.

Embrace the change brought by the SEC's new rule as an opportunity for growth and excellence. With Cobalt Intelligence as your partner, you're well-equipped to thrive in this evolving financial environment.

Feel free to reply to this email to get started.

You can also check our Free Financial AI Tools here. We included the videos how to use the tool so you can explore how we can help!

Headlines You Don’t Want to Miss

Michigan’s proposed regulations and laws related to payday loans The Michigan legislature is considering two bills: one that would cap interest rates on payday loans at 36%, and another that would establish a separate, less stringent legal framework for smaller loans.

Navy Federal’s alleged racial disparity in mortgage lending The report has been criticised for not including important variables such as credit scores and debt-to-income ratios, which are crucial factors in loan approval decisions. Navy Federal has responded to the claims, stating that it complies with all federal laws and regulations and does not discriminate against any applicant.

Sovereign Lending Group has agreed to pay $500,000 as a class-action settlement for violating the TCPA Sovereign Lending Group Inc was found to have violated the TCPA by authorizing telemarketing calls to cell phones without obtaining the prior express written consent of the recipients. The mortgage company denied all allegations but agreed to settle to avoid the further costs and risks of litigation.

Lloyd's of London eyes US mid-market Lloyd’s planning to use about 40% of its Central Fund for medium-sized US businesses to generate healthier investment returns. The endeavor combines underwriting expertise with a new asset class to deliver attractive risk-adjusted returns, thereby aligning investors’ interests with the insurance marketplace. This move is part of Lloyd's Blueprint Two strategy, which aims to build a "future-first-insurance" and reinsurance marketplace.