Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Approving a Proposed Rule Change To Adopt a Supplemental Liquidity Schedule, and Instructions Thereto, Pursuant to FINRA Rule 4524 (Supplemental FOCUS Information), 43698-43700 [2021-16965]

Download as PDF jbell on DSKJLSW7X2PROD with NOTICES 43698 Federal Register / Vol. 86, No. 151 / Tuesday, August 10, 2021 / Notices 2021, to allow more time for members of the public to submit their comments. The NRC is interested in obtaining a broad range of perspectives from stakeholders and interested persons. The focus of this request is to gather information to inform a systematic assessment for how the NRC addresses environmental justice in its programs, policies, and activities, considering the agency’s mission and statutory authority. The NRC is particularly interested in receiving input on the following questions: (1) What is your understanding of what is meant by environmental justice at the NRC? (2) As described in the Commission’s 2004 Policy Statement on the Treatment of Environmental Justice Matters in NRC Regulatory and Licensing Actions (69 FR 52040), the NRC currently addresses environmental justice in its NEPA reviews to determine if a proposed agency action will have disproportionately high and adverse impacts on minority and low-income communities, defined as environmental justice communities. (a) When the NRC is conducting licensing and other regulatory reviews, the agency uses a variety of ways to gather information from stakeholders and interested persons on environmental impacts of the proposed agency action, such as in-person and virtual meetings, Federal Register notices requesting input, and dialog with community organizations. (i) How could the NRC expand how it engages and gathers input? (ii) What formal tools might there be to enhance information gathering from stakeholders and interested persons in NRC’s programs, policies, and activities? (iii) Can you describe any challenges that may affect your ability to engage with the NRC on environmental justice issues? (b) How could the NRC enhance opportunities for members of environmental justice communities to participate in licensing and regulatory activities, including the identification of impacts and other environmental justice concerns? (c) What ways could the NRC enhance identification of environmental justice communities? (d) What has the NRC historically done well, or currently does well that we could do more of or expand with respect to environmental justice in our programs, policies, and activities, including engagement efforts? In your view, what portions of the 2004 Policy Statement are effective? VerDate Sep<11>2014 17:05 Aug 09, 2021 Jkt 253001 (3) What actions could the NRC take to enhance consideration of environmental justice in the NRC’s programs, policies and activities and agency decision-making, considering the agency’s mission and statutory authority? (a) Would you recommend that NRC consider any particular organization’s environmental justice program(s) in its assessment? (b) Looking to other Federal, State, and Tribal agencies’ environmental justice programs, what actions could the NRC take to enhance consideration of environmental justice in the NRC’s programs, policies, and activities? (c) Considering recent Executive Orders on environmental justice, what actions could the NRC take to enhance consideration of environmental justice in the NRC’s programs, policies, and activities? (d) Are there opportunities to expand consideration of environmental justice in NRC programs, policies, and activities, considering the agency’s mission? If so, what are they? Dated: August 4, 2021. For the Nuclear Regulatory Commission. Gregory F. Suber, Director, Environmental Justice Review Team, Office of the Executive Director for Operations. [FR Doc. 2021–16970 Filed 8–9–21; 8:45 am] BILLING CODE 7590–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–92561; File No. SR–FINRA– 2021–009] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Approving a Proposed Rule Change To Adopt a Supplemental Liquidity Schedule, and Instructions Thereto, Pursuant to FINRA Rule 4524 (Supplemental FOCUS Information) August 4, 2021. I. Introduction On April 30, 2021, the Financial industry Regulatory Authority (‘‘FINRA’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act (‘‘Exchange Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to adopt a Supplemental Liquidity Schedule, and Instructions thereto, 1 15 2 17 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00075 Fmt 4703 Sfmt 4703 pursuant to FINRA Rule 4524 (Supplemental FOCUS Information). The proposed rule change was published for comment in the Federal Register on May 18, 2021.3 The comment period closed on June 8, 2021. The Commission received one comment letter in response to the Notice.4 On June 22, 2021, FINRA extended the time period in which the Commission must approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the proposed rule change to August 16, 2021. On July 7, 2021, FINRA responded to the comment letter received in response to the Notice.5 For the reasons discussed below, the Commission is approving the proposed rule change. II. Description of the Proposed Rule Change 6 FINRA Rule 4524 provides in part that FINRA may require certain members to file supplements to the Financial and Operational Combined Uniform Single Report (‘‘FOCUS Report’’), which is filed pursuant to Rule 17a–5 under the Exchange Act 7 and FINRA Rule 2010. These supplements may include such additional financial or operational schedules or reports as FINRA may deem necessary or appropriate for the protection of investors or in the public interest. FINRA Rule 4524 further requires FINRA to file a proposed schedule or report with the Commission pursuant to section 19(b) of the Exchange Act. Pursuant to FINRA Rule 4524, FINRA proposed to adopt a Supplemental Liquidity Schedule (‘‘SLS’’), and Instructions thereto. A FINRA member that would be required to file the Form SLS would report detailed information relating to the member’s: 3 See Exchange Act Release No. 91876 (May 12, 2021), 86 FR 27005 (May 18, 2021) (File No. SR– FINRA–2021–009) (‘‘Notice’’). 4 See Letter from Kevin Zambrowicz, Managing Director & Associate General Counsel, the Securities Industry and Financial Markets Association (‘‘SIFMA’’), dated June 8, 2021 (‘‘SIFMA Letter’’). 5 See Letter from Adam Arkel, Associate General Counsel, Office of General Counsel, FINRA, to Vanessa Countryman, Secretary, U.S. Securities and Exchange Commission, dated July 7, 2021 (‘‘FINRA Letter’’). The FINRA Letter is available on FINRA’s website at https://www.finra.org/sites/default/files/ 2021-07/sr-finra-2021-009-response-tocomments.pdf, on the Commission’s website at https://www.sec.gov/comments/sr-finra-2021-009/ srfinra2021009.htm, and at the Commission’s Public Reference Room. 6 The subsequent description of the proposed rule change is substantially excerpted from FINRA’s description in the Notice. See Notice, 86 FR at 27005–06. 7 17 CFR 240.17a–5 (‘‘Rule 17a–5’’). Paragraph (a) of Rule 17a–5 requires a broker-dealer to file a version of the FOCUS Report. E:\FR\FM\10AUN1.SGM 10AUN1 Federal Register / Vol. 86, No. 151 / Tuesday, August 10, 2021 / Notices • Reverse repurchase and repurchase agreements; • securities borrowed and securities loaned; • non-cash reverse repurchase and securities borrowed transactions; • non-cash repurchase and securities loaned transactions; • bank loan and other committed and uncommitted credit facilities; • total available collateral in the member’s custody; • margin and non-purpose loans; • collateral securing margin loans; • deposits at clearing organizations; and • cash and securities received and delivered on derivative transactions not cleared through a central clearing counterparty (‘‘CCP’’). According to FINRA, the SLS is tailored to apply only to members with the largest customer and counterparty exposures. Unless otherwise permitted by FINRA in writing, each carrying member with $25 million or more in free credit balances, as defined under Exchange Act Rule 15c3–3(a)(8),8 and each member whose aggregate amount outstanding under repurchase agreements, securities loan contracts and bank loans is equal to or greater than $1 billion, as reported on the member’s most recently filed FOCUS report, would be required to file the SLS. The SLS would be required to be completed as of the last business day of each month and filed within 24 business days after the end of the month. A member would not need to file the SLS for any period where the member does not meet the $25 million or $1 billion thresholds. jbell on DSKJLSW7X2PROD with NOTICES III. Comment Summary As noted above, the Commission received one comment letter in response to the Notice.9 In its comment letter, SIFMA asked that the implementation timing of the SLS be aligned with the implementation of the Federal Reserve Board’s ‘‘6G’’ reporting framework with respect to the FR 2052a reports required to be filed by FINRA member firms that have bank holding company affiliates,10 or that additional time be allotted for the implementation of the SLS.11 Additionally, noting that some of the reporting requirements for the SLS may be duplicative of information that must be reported to the Federal Reserve Board on FR 2052a reports, SIFMA has asked 8 17 CFR 240.15c3–3 (‘‘Rule 15c3–3’’). supra note 4. 10 According to SIFMA, member firms are expected to be working on the implementation of the Federal Reserve 6G reporting through the end of 2022. 11 See SIFMA Letter at 3. 9 See VerDate Sep<11>2014 17:05 Aug 09, 2021 Jkt 253001 that the SLS contain an ‘‘overlay’’ that is mapped to the 5G/6G reporting frameworks of the Federal Reserve Board. According to SIFMA, this would have the effect of consolidating certain reporting categories where the respective categories and definitions align for the FINRA and the Federal Reserve Board reports, which would in turn streamline the reporting process for firms that are required to file with both FINRA and the Federal Reserve Board. Firms that are not required to file with both FINRA and the Federal Reserve Board would not be impacted, according to SIFMA.12 In response, FINRA reiterated that the proposed SLS is designed to improve FINRA’s ability to monitor for events that signal an adverse change in the liquidity risk of broker-dealers that that file the schedule. FINRA also noted the extensive prior outreach and discussions that FINRA conducted regarding the potential burdens on broker-dealers that are subsidiaries of bank holding companies. According to FINRA, this consultation resulted in the alignment of categories in the proposed SLS with reporting required in the Federal Reserve Board’s Complex Institution Liquidity Monitoring Report (referred to as ‘‘FR 2052a’’).13 FINRA also stated the SLS serves an important regulatory purpose because access to the information that would be reported on the SLS is important for FINRA to efficiently monitor on an ongoing basis the liquidity profile of its members. FINRA stated that the information would facilitate FINRA’s efforts to understand and respond to firms that may appear similar based on their balance sheets, but in fact have different liquidity risk profiles which could negatively the ability to fund operations during periods of market stress or other stress events. Absent the reporting set forth in the SLS, FINRA noted that it would need to request such information on a firm-by-firm basis as the need arises, which could, according to FINRA, result in similar or potentially larger costs for some firms.14 While acknowledging that some members that would be subject to the proposed SLS could face potential burdens with respect to reporting requirements from other regulators, FINRA stated that it would revisit the reporting categories in the proposed SLS as appropriate with respect to potential alignments of such categories with other reporting requirements, including the FR 2052a, depending on how they 12 See 13 See SIFMA Letter at 3–4. FINRA Letter at 2. 14 Id. PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 43699 evolve in the future. Consequently, FINRA stated that it believes it would not be appropriate to delay implementation of the proposed SLS.15 Finally, FINRA stated that it believes that the proposed timeframe for implementation of the proposed SLS set forward in the Notice affords members sufficient time to prepare.16 IV. Discussion and Commission Findings After careful review of the proposed rule change, the comment letter, and FINRA’s response to the comment letter, the Commission finds that the proposal is consistent with the requirements of the Exchange Act and the rules and regulations thereunder that are applicable to a national securities association.17 Specifically, the Commission finds that the proposed rule change is consistent with Section 15A(b)(6) of the Exchange Act,18 which requires, among other things, that the Commission determine any FINRA rule to be designed to protect investors and the public interest. The Commission believes that the proposed SLS, which will require certain FINRA members, subject to the thresholds described above, to provide detailed information regarding various aspects of the member’s liquidity profile will enable more effective monitoring of the liquidity risk of FINRA members by the Commission and FINRA. The Commission believes that regular and ongoing access to such information is important for the purpose of understanding the liquidity risks that member firms face, as well as differences in liquidity risks among firms that otherwise may appear to be similar based on similar characteristics in the firms’ balance sheets. By enabling more effective monitoring of liquidity risk, the Commission believes that the information obtained through the SLS will protect investors and the public interest by providing FINRA and the Commission with information needed to better anticipate and respond to the risks that FINRA member firms may face during market or other stress events that could jeopardize their ability to fund their operations. FINRA estimates that between 85 and 100 broker-dealers will be required to file Form SLS, the universe of broker-dealers carrying customer accounts with at least $25 million in free credit balances or with 15 Id. at 3. 16 Id. 17 In approving this rule change, the Commission has considered the rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 18 15 U.S.C. 78o–3(b)(6). E:\FR\FM\10AUN1.SGM 10AUN1 jbell on DSKJLSW7X2PROD with NOTICES 43700 Federal Register / Vol. 86, No. 151 / Tuesday, August 10, 2021 / Notices a minimum of $1 billion in repurchase agreements, bank loans or securities loans outstanding. Therefore, the Commission believes that the proposed Form SLS is reasonably designed to apply only to those broker-dealers that have the highest potential to adversely affect investors and the public interest in a liquidity stress event. Finally, the Commission believes that FINRA has reasonably addressed the concerns raised by SIFMA’s comment letter. Specifically, the Commission agrees that the SLS would serve an important regulatory purpose by providing FINRA and the Commission with information useful in evaluating a member firm’s liquidity risk profile. While the Commission recognizes that there is the potential for burdens on certain member firms that are subject to the regulatory reporting requirements of other regulators, the Commission believes that the important regulatory purpose served by the SLS justifies the potential burdens. The Commission believes that absent the SLS, FINRA and the Commission would be required to request the information supplied in the SLS repeatedly and on a firm-by-firm basis in order to obtain the information necessary to monitor member firms for potential liquidity concerns. Such an approach would not only create regulatory inefficiency, but could also result in similar or potentially larger costs for firms, as FINRA noted. Moreover, in light of the prior outreach that FINRA has conducted including publishing an earlier version of SLS in January 2018 and revising it in response to feedback from industry participants,19 the Commission believes that FINRA’s proposed approach to revisit the reporting categories in the SLS with a view to potential alignments of such categories with other reporting requirements depending on how they evolve would have the effect of further minimizing the regulatory burdens on member firms subject to the SLS. Consequently, the Commission believes that FINRA has appropriately addressed concerns raised in the comment letter concerning reducing the reporting costs imposed by the SLS. Finally, the Commission agrees with FINRA that it is not appropriate to delay implementation of the SLS beyond the timeframe set forth in the Notice. Because FINRA previously published a version of the SLS in 2018, and will announce an effective date that will be 180 days following the publication of a Regulatory Notice published no later 19 See Regulatory Notice 18–02 (January 2018) (Liquidity Reporting and Notification). See also Notice, 86 FR at 27006. VerDate Sep<11>2014 17:05 Aug 09, 2021 Jkt 253001 than 30 days after Commission approval, the Commission believes that member firms will have sufficient time to prepare to implement the SLS. Furthermore, in light of recent events connected to market volatility, which were discussed in the Notice,20 the Commission believes that further delaying implementation of the SLS will undermine the regulatory interest that the Commission and FINRA have in monitoring member firms’ liquidity risk profiles. V. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,21 that the proposed rule change (SR–FINRA– 2021–009) be, and hereby is, approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.22 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–16965 Filed 8–9–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–92559; File No. SR– NYSEAMER–2021–34] Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the NYSE American Options Fee Schedule August 4, 2021. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on July 28, 2021, NYSE American LLC (‘‘NYSE American’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the selfregulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the NYSE American Options Fee Schedule (‘‘Fee Schedule’’). The Exchange 20 See Notice, 86 FR at 27005. U.S.C. 78s(b)(2). 22 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 21 15 PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 proposes to implement the fee change effective July 28, 2021. The proposed rule change is available on the Exchange’s website at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of this filing is to amend the Fee Schedule to remove language associated with fee waivers that expired at the close of business on June 30, 2021. On March 18, 2020, the Exchange announced that it would temporarily close the Trading Floor, effective Monday, March 23, 2020, as a precautionary measure to prevent the potential spread of COVID–19. Following the temporary closure of the Trading Floor, the Exchange waived certain Floor-based fixed fees for April, May, and June 2020.4 Although the Trading Floor partially reopened on May 26, 2020 and Floor-based open outcry activity was supported, certain participants were unable to resume preFloor closure levels of operations. As a result, the Exchange extended the fee waiver through June 2021, but only for Floor Broker firms that were unable to operate at more than 50% of their March 2020 on-Floor staffing levels and for Market Maker firms that had vacant or ‘‘unmanned’’ Podia for the entire month 4 See Securities Exchange Act Release Nos. 88595 (April 8, 2020), 85 FR 20737 (April 14, 2020) (SR– NYSEAMER–2020–25) (waiving Floor-based fixed fees); 88840 (May 8, 2020), 85 FR 28992 (May 14, 2020) (SR–NYSEAMER–2020–37) (extending April 2020 fee changes through May 2020); and 89049 (June 11, 2020), 85 FR 36649 (June 17, 2020) (SR– NYSEAMER–2020–44) (extending April and May fee changes through June 2020). E:\FR\FM\10AUN1.SGM 10AUN1

Agencies

[Federal Register Volume 86, Number 151 (Tuesday, August 10, 2021)]
[Notices]
[Pages 43698-43700]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-16965]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92561; File No. SR-FINRA-2021-009]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Order Approving a Proposed Rule Change To Adopt a 
Supplemental Liquidity Schedule, and Instructions Thereto, Pursuant to 
FINRA Rule 4524 (Supplemental FOCUS Information)

August 4, 2021.

I. Introduction

    On April 30, 2021, the Financial industry Regulatory Authority 
(``FINRA'') filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act (``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to adopt a Supplemental Liquidity Schedule, and 
Instructions thereto, pursuant to FINRA Rule 4524 (Supplemental FOCUS 
Information).
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

    The proposed rule change was published for comment in the Federal 
Register on May 18, 2021.\3\ The comment period closed on June 8, 2021. 
The Commission received one comment letter in response to the 
Notice.\4\ On June 22, 2021, FINRA extended the time period in which 
the Commission must approve the proposed rule change, disapprove the 
proposed rule change, or institute proceedings to determine whether to 
disapprove the proposed rule change to August 16, 2021. On July 7, 
2021, FINRA responded to the comment letter received in response to the 
Notice.\5\ For the reasons discussed below, the Commission is approving 
the proposed rule change.
---------------------------------------------------------------------------

    \3\ See Exchange Act Release No. 91876 (May 12, 2021), 86 FR 
27005 (May 18, 2021) (File No. SR-FINRA-2021-009) (``Notice'').
    \4\ See Letter from Kevin Zambrowicz, Managing Director & 
Associate General Counsel, the Securities Industry and Financial 
Markets Association (``SIFMA''), dated June 8, 2021 (``SIFMA 
Letter'').
    \5\ See Letter from Adam Arkel, Associate General Counsel, 
Office of General Counsel, FINRA, to Vanessa Countryman, Secretary, 
U.S. Securities and Exchange Commission, dated July 7, 2021 (``FINRA 
Letter''). The FINRA Letter is available on FINRA's website at 
https://www.finra.org/sites/default/files/2021-07/sr-finra-2021-009-response-to-comments.pdf, on the Commission's website at https://www.sec.gov/comments/sr-finra-2021-009/srfinra2021009.htm, and at 
the Commission's Public Reference Room.
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change 6
---------------------------------------------------------------------------

    \6\ The subsequent description of the proposed rule change is 
substantially excerpted from FINRA's description in the Notice. See 
Notice, 86 FR at 27005-06.
---------------------------------------------------------------------------

    FINRA Rule 4524 provides in part that FINRA may require certain 
members to file supplements to the Financial and Operational Combined 
Uniform Single Report (``FOCUS Report''), which is filed pursuant to 
Rule 17a-5 under the Exchange Act \7\ and FINRA Rule 2010. These 
supplements may include such additional financial or operational 
schedules or reports as FINRA may deem necessary or appropriate for the 
protection of investors or in the public interest. FINRA Rule 4524 
further requires FINRA to file a proposed schedule or report with the 
Commission pursuant to section 19(b) of the Exchange Act. Pursuant to 
FINRA Rule 4524, FINRA proposed to adopt a Supplemental Liquidity 
Schedule (``SLS''), and Instructions thereto.
---------------------------------------------------------------------------

    \7\ 17 CFR 240.17a-5 (``Rule 17a-5''). Paragraph (a) of Rule 
17a-5 requires a broker-dealer to file a version of the FOCUS 
Report.
---------------------------------------------------------------------------

    A FINRA member that would be required to file the Form SLS would 
report detailed information relating to the member's:

[[Page 43699]]

     Reverse repurchase and repurchase agreements;
     securities borrowed and securities loaned;
     non-cash reverse repurchase and securities borrowed 
transactions;
     non-cash repurchase and securities loaned transactions;
     bank loan and other committed and uncommitted credit 
facilities;
     total available collateral in the member's custody;
     margin and non-purpose loans;
     collateral securing margin loans;
     deposits at clearing organizations; and
     cash and securities received and delivered on derivative 
transactions not cleared through a central clearing counterparty 
(``CCP'').
    According to FINRA, the SLS is tailored to apply only to members 
with the largest customer and counterparty exposures. Unless otherwise 
permitted by FINRA in writing, each carrying member with $25 million or 
more in free credit balances, as defined under Exchange Act Rule 15c3-
3(a)(8),\8\ and each member whose aggregate amount outstanding under 
repurchase agreements, securities loan contracts and bank loans is 
equal to or greater than $1 billion, as reported on the member's most 
recently filed FOCUS report, would be required to file the SLS. The SLS 
would be required to be completed as of the last business day of each 
month and filed within 24 business days after the end of the month. A 
member would not need to file the SLS for any period where the member 
does not meet the $25 million or $1 billion thresholds.
---------------------------------------------------------------------------

    \8\ 17 CFR 240.15c3-3 (``Rule 15c3-3'').
---------------------------------------------------------------------------

III. Comment Summary

    As noted above, the Commission received one comment letter in 
response to the Notice.\9\ In its comment letter, SIFMA asked that the 
implementation timing of the SLS be aligned with the implementation of 
the Federal Reserve Board's ``6G'' reporting framework with respect to 
the FR 2052a reports required to be filed by FINRA member firms that 
have bank holding company affiliates,\10\ or that additional time be 
allotted for the implementation of the SLS.\11\
---------------------------------------------------------------------------

    \9\ See supra note 4.
    \10\ According to SIFMA, member firms are expected to be working 
on the implementation of the Federal Reserve 6G reporting through 
the end of 2022.
    \11\ See SIFMA Letter at 3.
---------------------------------------------------------------------------

    Additionally, noting that some of the reporting requirements for 
the SLS may be duplicative of information that must be reported to the 
Federal Reserve Board on FR 2052a reports, SIFMA has asked that the SLS 
contain an ``overlay'' that is mapped to the 5G/6G reporting frameworks 
of the Federal Reserve Board. According to SIFMA, this would have the 
effect of consolidating certain reporting categories where the 
respective categories and definitions align for the FINRA and the 
Federal Reserve Board reports, which would in turn streamline the 
reporting process for firms that are required to file with both FINRA 
and the Federal Reserve Board. Firms that are not required to file with 
both FINRA and the Federal Reserve Board would not be impacted, 
according to SIFMA.\12\
---------------------------------------------------------------------------

    \12\ See SIFMA Letter at 3-4.
---------------------------------------------------------------------------

    In response, FINRA reiterated that the proposed SLS is designed to 
improve FINRA's ability to monitor for events that signal an adverse 
change in the liquidity risk of broker-dealers that that file the 
schedule. FINRA also noted the extensive prior outreach and discussions 
that FINRA conducted regarding the potential burdens on broker-dealers 
that are subsidiaries of bank holding companies. According to FINRA, 
this consultation resulted in the alignment of categories in the 
proposed SLS with reporting required in the Federal Reserve Board's 
Complex Institution Liquidity Monitoring Report (referred to as ``FR 
2052a'').\13\
---------------------------------------------------------------------------

    \13\ See FINRA Letter at 2.
---------------------------------------------------------------------------

    FINRA also stated the SLS serves an important regulatory purpose 
because access to the information that would be reported on the SLS is 
important for FINRA to efficiently monitor on an ongoing basis the 
liquidity profile of its members. FINRA stated that the information 
would facilitate FINRA's efforts to understand and respond to firms 
that may appear similar based on their balance sheets, but in fact have 
different liquidity risk profiles which could negatively the ability to 
fund operations during periods of market stress or other stress events. 
Absent the reporting set forth in the SLS, FINRA noted that it would 
need to request such information on a firm-by-firm basis as the need 
arises, which could, according to FINRA, result in similar or 
potentially larger costs for some firms.\14\
---------------------------------------------------------------------------

    \14\ Id.
---------------------------------------------------------------------------

    While acknowledging that some members that would be subject to the 
proposed SLS could face potential burdens with respect to reporting 
requirements from other regulators, FINRA stated that it would revisit 
the reporting categories in the proposed SLS as appropriate with 
respect to potential alignments of such categories with other reporting 
requirements, including the FR 2052a, depending on how they evolve in 
the future. Consequently, FINRA stated that it believes it would not be 
appropriate to delay implementation of the proposed SLS.\15\
---------------------------------------------------------------------------

    \15\ Id. at 3.
---------------------------------------------------------------------------

    Finally, FINRA stated that it believes that the proposed timeframe 
for implementation of the proposed SLS set forward in the Notice 
affords members sufficient time to prepare.\16\
---------------------------------------------------------------------------

    \16\ Id.
---------------------------------------------------------------------------

IV. Discussion and Commission Findings

    After careful review of the proposed rule change, the comment 
letter, and FINRA's response to the comment letter, the Commission 
finds that the proposal is consistent with the requirements of the 
Exchange Act and the rules and regulations thereunder that are 
applicable to a national securities association.\17\ Specifically, the 
Commission finds that the proposed rule change is consistent with 
Section 15A(b)(6) of the Exchange Act,\18\ which requires, among other 
things, that the Commission determine any FINRA rule to be designed to 
protect investors and the public interest.
---------------------------------------------------------------------------

    \17\ In approving this rule change, the Commission has 
considered the rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \18\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

    The Commission believes that the proposed SLS, which will require 
certain FINRA members, subject to the thresholds described above, to 
provide detailed information regarding various aspects of the member's 
liquidity profile will enable more effective monitoring of the 
liquidity risk of FINRA members by the Commission and FINRA. The 
Commission believes that regular and ongoing access to such information 
is important for the purpose of understanding the liquidity risks that 
member firms face, as well as differences in liquidity risks among 
firms that otherwise may appear to be similar based on similar 
characteristics in the firms' balance sheets. By enabling more 
effective monitoring of liquidity risk, the Commission believes that 
the information obtained through the SLS will protect investors and the 
public interest by providing FINRA and the Commission with information 
needed to better anticipate and respond to the risks that FINRA member 
firms may face during market or other stress events that could 
jeopardize their ability to fund their operations. FINRA estimates that 
between 85 and 100 broker-dealers will be required to file Form SLS, 
the universe of broker-dealers carrying customer accounts with at least 
$25 million in free credit balances or with

[[Page 43700]]

a minimum of $1 billion in repurchase agreements, bank loans or 
securities loans outstanding. Therefore, the Commission believes that 
the proposed Form SLS is reasonably designed to apply only to those 
broker-dealers that have the highest potential to adversely affect 
investors and the public interest in a liquidity stress event.
    Finally, the Commission believes that FINRA has reasonably 
addressed the concerns raised by SIFMA's comment letter. Specifically, 
the Commission agrees that the SLS would serve an important regulatory 
purpose by providing FINRA and the Commission with information useful 
in evaluating a member firm's liquidity risk profile. While the 
Commission recognizes that there is the potential for burdens on 
certain member firms that are subject to the regulatory reporting 
requirements of other regulators, the Commission believes that the 
important regulatory purpose served by the SLS justifies the potential 
burdens. The Commission believes that absent the SLS, FINRA and the 
Commission would be required to request the information supplied in the 
SLS repeatedly and on a firm-by-firm basis in order to obtain the 
information necessary to monitor member firms for potential liquidity 
concerns. Such an approach would not only create regulatory 
inefficiency, but could also result in similar or potentially larger 
costs for firms, as FINRA noted.
    Moreover, in light of the prior outreach that FINRA has conducted 
including publishing an earlier version of SLS in January 2018 and 
revising it in response to feedback from industry participants,\19\ the 
Commission believes that FINRA's proposed approach to revisit the 
reporting categories in the SLS with a view to potential alignments of 
such categories with other reporting requirements depending on how they 
evolve would have the effect of further minimizing the regulatory 
burdens on member firms subject to the SLS. Consequently, the 
Commission believes that FINRA has appropriately addressed concerns 
raised in the comment letter concerning reducing the reporting costs 
imposed by the SLS.
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    \19\ See Regulatory Notice 18-02 (January 2018) (Liquidity 
Reporting and Notification). See also Notice, 86 FR at 27006.
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    Finally, the Commission agrees with FINRA that it is not 
appropriate to delay implementation of the SLS beyond the timeframe set 
forth in the Notice. Because FINRA previously published a version of 
the SLS in 2018, and will announce an effective date that will be 180 
days following the publication of a Regulatory Notice published no 
later than 30 days after Commission approval, the Commission believes 
that member firms will have sufficient time to prepare to implement the 
SLS. Furthermore, in light of recent events connected to market 
volatility, which were discussed in the Notice,\20\ the Commission 
believes that further delaying implementation of the SLS will undermine 
the regulatory interest that the Commission and FINRA have in 
monitoring member firms' liquidity risk profiles.
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    \20\ See Notice, 86 FR at 27005.
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\21\ that the proposed rule change (SR-FINRA-2021-009) be, and 
hereby is, approved.
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    \21\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-16965 Filed 8-9-21; 8:45 am]
BILLING CODE 8011-01-P
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