United States: SEC Extends Exemption For Broker-Dealers From Certain Large Trader Recordkeeping And Reporting Requirements

The SEC extended temporary relief to broker-dealers from certain recordkeeping, reporting and monitoring requirements for large trader reporting pursuant to Exchange Act Rule 13h-1 (the "Rule"). The extended temporary relief exempts broker-dealers from complying with the third and final phase-in of the recordkeeping, reporting and monitoring requirements of the Rule until November 15, 2018.

Under the Rule, large traders must identify themselves through Form 13H, and broker-dealers must keep records of large trader transactions and report information regarding these transactions to the SEC upon request. The recordkeeping, reporting and monitoring elements of the Rule have been made effective through a phased-in implementation. The final phase would require broker-dealers to capture and report the execution time of all large trader transactions. (Previous phases mandated compliance with the recordkeeping and reporting requirements for (i) broker-dealers that carried accounts for large traders and (ii) clearing brokers with respect to proprietary transactions and transactions effected pursuant to sponsored and direct-access arrangements with customers.)

The granted extension is in response to requests for exemptive relief submitted to the SEC by the Financial Information Forum ("FIF") and SIFMA (together with FIF, the "Industry Organizations"). The Industry Organizations argued that the Consolidated Audit Trail ("CAT") reporting requirements could be duplicative of the recordkeeping and reporting requirements of the Rule, and requested that the third phase-in period for the Rule be terminated or, alternatively, delayed at least for another three to five years.

Commentary / Patrick A. Calves

According to the SEC, it extended the relief for the third phase-in of the large trader reporting and recordkeeping requirements until November 15, 2018 to "focus broker-dealer attention and resources on implementing the CAT in the near term." However, unless the relief is extended further into the future, it is unlikely to have its stated intended result, as the relief currently is set to terminate simultaneously with the CAT compliance date for most firms.

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