SEC Proposes Rule to Increase Transparency for Securities Lending Transactions

November 23, 2021

On November 18, 2021, the SEC published proposed Exchange Act Rule 10c-1 (Rule), which would require any person that loans a security (including investment companies, banks, insurance companies and pension funds) on behalf of itself or another person to report the material terms of those securities lending transactions to a registered national securities association (RNSA), such as FINRA. The Rule would also require those persons to report related information regarding the securities the person has on loan and available to loan to a RNSA. The Rule would further require that the RNSA make available to the public certain information concerning each transaction and aggregate information regarding securities on loan and available to loan. However, RNSAs would not make public certain information, such as the legal names of the parties to the loan.

The information reported to RNSAs would include, among other things, the name of the issuer of the securities; the amount of securities loaned; certain rates, fees, and charges for the loan; the type of collateral for the loan; and the borrower type (e.g., broker, dealer, bank, customer, clearing agency, and custodian).

Section 984(b) of the Dodd-Frank Act mandates that the SEC promulgate rules that are designed to increase the transparency of information available to brokers, dealers, and investors with respect to loaning or borrowing securities. The SEC states that the proposed Rule is consistent with this mandate and will operate to increase transparency and efficiency in an otherwise opaque securities lending market.

The SEC press release can be found here.

The proposed rule can be found here.

A fact sheet on the proposed rule can be found here.


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Compliance, Investment Advisers, Investment Companies, Mutual Funds, Regulatory