Request for Extension on Securities Loan Reporting Proposal
November 23, 2021
Securities and Exchange Commission
100 F Street NE., Washington, DC 20549
Re: File No. S7-18-21; Reporting of Securities Loans
Dear Ms. Countryman:
On behalf of their memberships, the Securities Industry and Financial Markets Association, the SIFMA Asset Management Group, the Risk Management Association, the Managed Funds Association, the Investment Company Institute, the Investment Adviser Association, and the Security Traders Association (together, the “Associations”) respectfully request that the U.S. Securities and Exchange Commission (“Commission”) extend the comment period for the above-refenced proposal (“Proposal”) from the current 30-day period to a 90-day period from the date of publication in the Federal Register to provide the industry and the public with a more appropriate time period in which to evaluate and comment on the Proposal. Given the scope and breadth of the Proposal, its significant implications for a broad range of market participants, and the upcoming end-of-year holidays, the current 30-day period is not enough time for the Commission to solicit meaningful feedback on the Proposal. Thus, under these circumstances, the length of the comment period is inconsistent with the spirit of the Administrative Procedure Act, which requires that agencies provide the public with adequate notice of a proposed rule followed by a meaningful opportunity to comment on the rule’s content. The Associations are eager to work with the Commission and its staff in support of increased transparency in the securities lending market, but additional time is needed to understand and consider the impact of the new securities lending regime proposed by the Commission.
Section 984(b) of the Dodd-Frank Act requires the Commission to “promulgate rules that are designed to increase the transparency of information available to brokers, dealers, and investors, with respect to the loan or borrowing of securities,” within two years of the enactment of the Act. We appreciate that the Commission is intent on completing this unfinished Dodd- Frank rulemaking. Providing an appropriate comment period of 90 days, however, will not significantly slow the Commission’s efforts in this regard and will result in a better rule consistent with this mandate.
In exercising its discretion under Section 984, the Commission has proposed an entirely new regulatory framework with significant requirements on the securities lending markets and the varied participants in them, including broker-dealers, agent lender banks, and investment advisers of mutual funds, private funds and pension funds, among other investors. The Proposal requires near real-time reporting to FINRA of all securities lending transactions by persons effecting such loans, including non-FINRA members over which FINRA historically has not had jurisdiction under the Securities Exchange Act of 1934. The Proposal also requires FINRA to establish a public dissemination system in which certain information from these transactions will be reported to the public.
The significance of the Proposal is evidenced by the 97 specific areas in which the Commission seeks comment and the multiple questions within these areas. In other rulemakings of this magnitude, the Commission historically has provided the public with a 60 or 90-day comment period. For instance, when the Commission sought to implement a Dodd-Frank Act rulemaking mandate to prohibit certain material conflicts of interest regarding asset-backed securities, the Commission provided the public with an initial 90-day comment period and subsequently extended that comment period. The Commission very rarely provides a comment period on proposals as short as 30 days, and those typically involve very ministerial rulemakings. For instance, along with other federal agencies, the Commission in 2017 proposed ministerial updates to its Freedom of Information Act (“FOIA”) regulations largely in response to the FOIA Improvement Act of 2016 and provided a 30-day comment period on the proposed updates. Unlike the new and vast changes the Proposal would impose the securities lending market, this Commission rulemaking made ministerial changes to the Commission’s FOIA regulations, such as requiring that records FOIA requires to be made available for public inspection be available in electronic format.
Given the breadth of the vast new requirements proposed for the securities lending markets and the potential costs that they may impose on a broad range of participants in these markets, the Commission by providing only a 30-day comment period does not afford the public enough time to properly evaluate the Proposal. The Associations respectfully request that the Commission extend the comment period on the Proposal so that Association member firms and the public have 90 days in which to comment on the Proposal. We further request that the Commission announce such an extension as soon as possible to allow firms and the public to make appropriate plans to solicit meaningful feedback from interested market participants that they can incorporate in comments on the Proposal.
Thank you for your consideration of this request. If you any questions about it, please do not hesitate to contact the leaders of the Association signatories below that are listed in the Appendix.
The Securities Industry and Financial Markets Association The SIFMA Asset Management Group
The Risk Management Association
The Managed Funds Association
The Investment Company Institute The Investment Adviser Association The Security Traders Association
cc: The Honorable Gary Gensler, Chair
The Honorable Elad L. Roisman, Commissioner
The Honorable Hester M. Peirce, Commissioner
The Honorable Allison Herren Lee, Commissioner The Honorable Caroline A. Crenshaw, Commissioner