On 13 October 2023, the US Securities and Exchange Commission (SEC) adopted new rule 10c-1a under the Securities Exchange Act of 1934. The new rule is intended to shine light on the securities lending market by providing the SEC with detailed information about most securities loans and making public, including to boards of trustees who oversee registered funds that engage in securities lending, sufficient information about such loans and Loan Rates (defined below) that they may evaluate the fairness of the loans in which funds engage.
Under rule 10c-1a, the Financial Industry Regulatory Authority (FINRA) will be required to adopt new rules (RNSA Rules) pursuant to which lenders or their intermediaries (e.g., securities lending agents) (Lenders) will report most securities loans to FINRA at the end of every business day. FINRA will then aggregate and publish a subset of the information by the following morning–namely, aggregate loan activity in a security and the security's aggregate Loan Rates. Information on individual loans will be published after a 20-day delay.
Rule 10c-1a will become effective 60 days after publication of the SEC adopting release in the Federal Register (Effective Date). FINRA will have four months from the Effective Date to propose the RNSA Rules and eight additional months total to adopt RNSA Rules. Lenders must start reporting loans to FINRA within 24 months of the Effective Date, and FINRA will have 90 days from then to begin to publish the aggregated data. Assuming for illustrative purposes that rule 10c-1a is published in the Federal Register on 27 October 2023, and FINRA takes the full amount of time allotted to propose and adopt the RNSA Rules, the timeline for compliance will be as follows:
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