The Financial Industry Regulatory Authority, Inc. ("FINRA") recently issued a Trade Reporting Notice1 to remind firms they must report any transaction in a "TRACE-Eligible Security" unless an exception applies. A "TRACE-Eligible Security" generally means a debt security that is denominated in U.S. dollars: (1) issued by a U.S. or foreign private issuer, and, if a "restricted security," sold pursuant to Securities Act Rule 144A; (2) issued or guaranteed by an executive agency or a government-sponsored Enterprise; or (3) a U.S. Treasury Security. Structured products issued by a bank also are generally TRACE-Eligible Securities.
FINRA noted that exclusive reliance on the TRACE master security list is insufficient to comply with the reporting obligations because there are circumstances where a member firm transacts in a security that is inactive in the TRACE system or has been removed from TRACE. Accordingly, member firms should have systems or process in place to determine whether a transaction is reportable regardless of whether a security is included the TRACE security master list. In addition, FINRA emphasized that the reporting obligations are independent from the notice requirement imposed on managing underwriters involved in a distribution or offering. FINRA urged member firms to contact Market Operations to add a TRACE-Eligible Security to the TRACE security master list and report the transaction.
1. The FINRA notice can be found here: https://bit.ly/3120cmd.
Originally published in REVERSEinquiries: Volume 2, Issue
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