[Federal Register Volume 85, Number 97 (Tuesday, May 19, 2020)]
[Notices]
[Pages 29993-29994]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-10770]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88866]
Order Designating Financial Industry Regulatory Authority, Inc.,
To Receive Form X-17A-5 (FOCUS Report) From Certain Security-Based Swap
Dealers and Major Security-Based Swap Participants
May 14, 2020.
I. Introduction
Currently, broker-dealers are required to file on a monthly or
quarterly basis various parts (Part II, Part IIB, Part II CSE, or Part
IIA) of Form X-17A-5 (``FOCUS Report''), a form which is used to report
financial and operational information. On September 19, 2019, the
Commission adopted recordkeeping, reporting, and notification
requirements for security-based swap dealers and major security-based
swap participants (collectively, ``security-based swap entities'' or
``SBSEs'') and additional recordkeeping and reporting requirements for
broker-dealers to account for their security-based swap activities.\1\
In adopting these requirements, the Commission amended Part II of the
FOCUS Report to elicit additional information about the security-based
swap activities of broker-dealers that file Part II, including broker-
dealers that will also be registered as SBSEs. In addition, the
Commission adopted amendments that will require the broker-dealers that
currently file Part IIB and Part II CSE to file revised Part II.
Further, the Commission adopted a rule (``Rule 18a-7'') pursuant to
Section 15F of the Securities Exchange Act of 1934 (``Exchange Act'')
that will require SBSEs that are not also registered with the
Commission as broker-dealers or regulated by a prudential regulator
(``stand-alone SBSEs'') to file Part II of the FOCUS Report on a
monthly basis and SBSEs for which there is a prudential regulator
(``bank SBSEs'') to file new Part IIC of the FOCUS Report on a
quarterly basis.\2\ The compliance date for these entities to file
revised Part II or new Part IIC of the FOCUS Report is October 6,
2021.\3\
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\1\ See Recordkeeping and Reporting Requirements for Security-
Based Swap Dealers, Major Security-Based Swap Participants, and
Broker-Dealers, Securities Exchange Act Release No. 87005 (Sept. 19,
2019), 84 FR 68550 (Dec. 16, 2019) (``Recordkeeping Adopting
Release'').
\2\ See 17 CFR 240.18a-7(a)(1) (applicable to stand-alone
SBSEs); 17 CFR 240.18a-7(a)(2) (applicable to bank SBSEs). Revised
Part II of the FOCUS Report is available on pages 68672-68721 of the
Recordkeeping Adopting Release. New Part IIC of the FOCUS Report is
available on pages 68722-68733 of the Recordkeeping Adopting
Release.
\3\ See Recordkeeping Adopting Release, 84 FR at 68600-601;
Cross-Border Application of Certain Security-Based Swap
Requirements, Exchange Act Release No. 87780 (Dec. 18, 2019), 85 FR
6270 (Feb. 4, 2020).
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Most broker-dealers currently file the FOCUS Report electronically
on the eFOCUS system \4\ developed by the Financial Industry Regulatory
Authority, Inc. (``FINRA''). These broker-dealers file the FOCUS Report
pursuant to a plan established by the broker-dealer's self-regulatory
organization (``SRO''), the procedures and provisions of which have
been submitted to and declared effective by the Commission pursuant to
paragraph (a)(3) of Exchange Act Rule 17a-5.\5\
[[Page 29994]]
Because stand-alone SBSEs and bank SBSEs will not be dually registered
as broker-dealers, they will not be supervised by SROs and therefore
are not subject to the SRO plans requiring the FOCUS Report to be filed
on FINRA's eFOCUS system. Rule 18a-7 requires stand-alone SBSEs and
bank SBSEs to file the FOCUS Report with ``the Commission or its
designee'' \6\ to provide the Commission with the option of requiring
that these registrants file the FOCUS Report with a third party.\7\ By
this order, the Commission is designating FINRA as the organization
with which stand-alone SBSEs and bank SBSEs must file revised Part II
and new Part IIC of the FOCUS Report, respectively, on and after the
October 6, 2021, compliance date.
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\4\ FINRA's eFOCUS system is available at https://www.finra.org/filing-reporting/efocus.
\5\ See 17 CFR 240.17a-5(a)(3).
\6\ See 17 CFR 240.18a-7(a).
\7\ See Recordkeeping Adopting Release, 84 FR at 68572.
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II. Discussion
FINRA is uniquely qualified to provide the Commission with a
familiar and consolidated platform for stand-alone SBSEs and bank SBSEs
to file the FOCUS Report, uniform ancillary ongoing services associated
with these filings, and a consolidated platform for transmitting this
data to the Commission.
First, FINRA-supervised broker-dealers currently file the FOCUS
Report through the eFOCUS system owned and operated by FINRA. The
Commission anticipates many firms that register as stand-alone SBSEs
and bank SBSEs will be affiliated with broker-dealers that currently
use the eFOCUS system. FINRA's eFOCUS system is unique in that it would
enable the broker-dealer and non-broker-dealer entities to file both
entities' FOCUS Reports on the same platform using the same preexisting
templates, software, and procedures currently used by the broker-
dealer.
Second, FINRA is uniquely able to transmit the data in the FOCUS
Report filings by broker-dealers and non-broker-dealer SBSEs in a
consolidated data transmission to the Commission. Thus, Commission
staff will be able to compare data between these different types of
entities in a consistent manner and in the same database, which will
allow staff to monitor these registrants more effectively.
Third, if FINRA is not designated to receive FOCUS Report filings
from stand-alone and bank SBSEs, a separate, parallel filing system
would need to be created only for non-FINRA supervised filers, which
would create complexity and redundancy because the same information for
required filers would be located on two different filing systems. This,
in turn, could create unnecessary confusion and uncertainty for filers.
It might also inadvertently result in different available services
simply based on which filing system the entity is assigned to use.
III. Conclusion
It is hereby ordered that FINRA is designated as the organization
with which stand-alone SBSEs must file Part II of FOCUS Report and bank
SBSEs must file Part IIC of the FOCUS Report in accordance with the
requirements of those filings, Section 15F of the Exchange Act, and
Rule 18a-7.\8\
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\8\ Technical instructions for filing the FOCUS Report with
FINRA will be made available on the Commission's or FINRA's website
before the October 6, 2021, compliance date.
By the Commission.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-10770 Filed 5-18-20; 8:45 am]
BILLING CODE 8011-01-P