Industry Groups Urge SEC to Modify Proposal on Sec Lending Disclosure

Leading asset managers and trade groups are urging the SEC to reconsider a recent proposal that would require funds that engage in securities lending to report the material terms of those transactions and disclose related information to a registered national securities association, likely Finra, that would then make public information about the transactions and  the securities loaned and available to loan. SIFMA, the leading trade association for broker-dealers, commented that the securities lending proposal would result in “significant unintended negative consequences;” impose significant costs; and could have an adverse impact on the securities lending market as well as the overall securities markets. SIFMA, as well as the Investment Company Institute, contended also that the 30-day comment period for the proposed rule is inadequate given the magnitude of the proposed new regime. SIFMA recommended several changes to the proposal including: a clearer definition of what it means to “loan a security” to focus exclusively on securities lending transactions; narrowing the scope of the data to be reported and to be made public; and replacing the 15-minute reporting period with the requirement to report by the end of next day (T+1), or at least no more frequently than by the end of each business day. BlackRock wrote that while it generally supports the effort to bring more transparency to the securities lending markets, the proposal “should be modified to ensure any new reporting requirements (i) account for the structure and operations particular to securities lending markets, (ii) adequately manage implementation timelines and costs, (iii) align with the objective to simplify and harmonize transaction reporting standards, and (iv) ensure publicly available data is informative to market participants.” The Investment Company Institute commented that the proposal in its current form “would not result in accurate, useful data that would help achieve the SEC’s objectives.”