SEC Adopts New Rule to Increase Transparency in the Securities Lending Market

Key Points:

• SEC adopts new Rule 10c-1a to enhance transparency and efficiency in the securities lending market.
• Rule 10c-1a requires certain individuals to disclose securities loan details to an RNSA and mandates RNSAs to make specific lending transaction information available to the public.
• SEC adopts new Rule in order to strengthens the oversight and enforcement abilities of RNSAs by requiring the reporting of confidential information and daily updates on aggregate transaction activity and loan rate distributions.

On October 13, 2023, the Securities and Exchange Commission (SEC) introduced a new regulation, known as Rule 10c-1a, to increase transparency in the Securities Lending Market

SEC Adopts New Rule 10c-1a

SEC adopts new Rule 10c-1a to enhance transparency and efficiency in the securities lending market. This rule requires certain individuals to disclose securities loan details to a registered national securities association (RNSA) and mandates RNSAs to make specific lending transaction information available to the public.

SEC Chair, Gary Gensler, highlights the importance of this regulation, especially after the 2008 financial crisis. He emphasizes the need to align with the Dodd-Frank Act’s mandate for transparency, which is in line with the SEC’s mission of promoting fair and efficient markets. Rule 10c-1a aims to ensure greater transparency in securities lending, benefiting regulators and the public.

Compliance Deadlines and Reporting Requirements for Rule 10c-1a

The rule strengthens the oversight and enforcement abilities of RNSAs by requiring the reporting of confidential information. RNSAs must also provide daily updates on aggregate transaction activity and loan rate distributions for each reportable security. Currently, the Financial Industry Regulatory Authority (FINRA) is the sole RNSA.

The official adoption of this rule will be published in the Federal Register and will become effective 60 days after publication. The compliance deadlines for this rule are as follows: (1) within four months of the effective date, an RNSA must propose the required rules; (2) no later than 12 months after the effective date, the proposed RNSA rules should be in effect; (3) starting on the first business day 24 months after the effective date, covered individuals must report information to an RNSA; and (4) RNSAs must publicly report information within 90 calendar days from the reporting date.

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