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FINRA Requests Comment on the Application of FINRA Rules to Security-Based Swaps
Practical Law Legal Update w-027-9798 (Approx. 3 pages)
FINRA Requests Comment on the Application of FINRA Rules to Security-Based Swaps
by Practical Law Corporate & Securities
| Published on 19 Oct 2020 • USA (National/Federal) |
FINRA is requesting comment on a concept proposal regarding the application of FINRA rules to security-based swaps.
On October 15, 2020, FINRA issued Regulatory Notice 20-36 to request comment on a concept proposal regarding the application of FINRA rules to security-based swaps (SBS) following the SEC's completion of its rulemaking regarding security-based swap dealers (SBSDs) and major security-based swap participants (MSBSPs, and together with SBSDs, SBS Entities). The Dodd-Frank Act granted the SEC with regulatory authority over SBS and required the SEC to establish a registration process for SBS Entities. The compliance date for the SEC registration rules, as well as rules establishing business conduct, net capital, and margin requirements for SBS Entities, is October 6, 2021. For more information on the SEC's rulemaking process, see Legal Updates:
Currently, FINRA Rule 0180, which is set to expire in September 2021, provides a temporary exception from the application of FINRA rules to SBS, with certain limited exceptions. FINRA is now considering whether to:
- Extend Rule 0180's expiration date to October 6, 2021 to match the SEC's registration compliance date for SBS Entities.
- Replace Rule 0180's general exception from FINRA rules for members engaging in SBS activities with targeted exemptions from certain FINRA rules.
- Amend the financial responsibility and operational rules to conform to the SEC's amended net capital rule and take into account members' SBS activities.
- Adopt a new margin rule specifically applicable to SBS.
Comments on FINRA's proposed amendments are due on or before November 16, 2020.