January 31, 2023

Volume XIII, Number 31


January 30, 2023

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FINRA Delays Rule 4210 Margining of Covered Agency Transactions to June 2018

On September 19, the Financial Industry Regulatory Authority (FINRA) took action to delay until June 25, 2018, the implementation of margin requirements for Covered Agency Transactions under FINRA Rule 4210. As defined in the amendments to FINRA Rule 4210, adopted in 2016, Covered Agency Transactions include (1) To Be Announced (TBA) transactions, inclusive of adjustable rate mortgage (ARM) transactions; (2) Specified Pool Transactions; and (3) transactions in Collateralized Mortgage Obligations (CMOs) issued in conformity with a program of an agency or Government Sponsored Enterprise (GSE), with forward settlement dates.

These margin requirements were scheduled to go into effect on December 15. However, at the request of industry participants seeking additional time to make necessary systems changes and update margining agreements and related documentation (including Master Securities Forward Transaction Agreements), FINRA has agreed to postpone the margin requirement effective date until June 25, 2018 and filed a proposed rule change with the Securities and Exchange Commission (SEC) to that effect. The text of the proposed rule change is available here.

FINRA has also made available SEC FAQs regarding Exchange Act Rules 15c3-1 and 15c3-3 in the context of Covered Agency Transactions, as well as its own FAQs regarding Covered Agency Transactions under FINRA Rule 4210.

The SEC FAQs are available here and the FINRA FAQs are available here.

©2023 Katten Muchin Rosenman LLPNational Law Review, Volume VII, Number 266

About this Author

Guy Dempsey Jr., Bank Regulations Legal Specialist, Katten Muchin

Guy C. Dempsey Jr. concentrates his practice on derivatives and structured products and on bank regulation. He advises clients on derivatives transactions of all types across all asset classes, as well as on the corporate governance, regulatory, collateral, compliance, insolvency and litigation issues associated with such products.

Much of Guy’s work involves helping bank and non-bank clients analyze the details and impact of the Dodd-Frank Act. He maintains deep knowledge of the banking laws and regulations relating to capital markets activities....

Michael T. Foley, Katten, Lawyer, Finance, FINRA, Chicago
Special Counsel

Michael Foley represents broker-dealers, investment advisers and other financial services industry participants with respect to a broad spectrum of legal and regulatory matters arising under the federal securities laws.

Michael has nearly 20 years of experience in private practice and in-house at both a large, full-service broker-dealer and at an online discount broker-dealer, advising broker-dealers and other financial institutions regarding compliance with the federal securities and commodities laws, and with the regulations of the US Securities and Exchange...