February 19, 2019

February 18, 2019

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FINRA Requests Comment on Proposed Amendments to FINRA Rule 4521 and New Supplemental Liquidity Schedule

On January 8, the Financial Industry Regulatory Authority (FINRA) requested comment on proposed amendments to FINRA Rule 4521. Currently, Rule 4521(c) requires each carrying or clearing firm to notify FINRA after tentative net capital has declined 20 percent or more from the amount reported on the most recent Financial and Operational Combined Uniform Single (FOCUS) Report or notification filed with FINRA. The proposed amendments would also require certain firms (i.e., carrying or clearing firms with $25 million or more in total credits as determined by the customer reserve formula computation, and each firm whose aggregate amount outstanding under repurchase agreements, securities loan contracts and bank loans is equal to or greater than $1 billion) to notify FINRA within 48 hours after the occurrence of various events that signal an adverse change in liquidity risk. Such events include certain losses of access to secured funding, counterparty increases in collateral haircuts and early terminations of outstanding repurchase contracts.

Together with the proposed amendments, FINRA also sought comment on a proposed new supplemental liquidity schedule to be filed, together with a FOCUS Report, by certain firms with the largest customer and counterparty exposures in order to provide more detailed information about such firms’ liquidity profile. Among other things, this schedule would seek disclosure of certain repurchase agreements, financing terms, collateral types, large counterparties, credit facilities, total available collateral and margin loans.

FINRA is seeking comment on all aspects of the proposed amendments and new schedule, including the impact on market participants. Comments can be submitted by emailing pubcom@finra.org or mailing FINRA’s Office of the Corporate Secretary. Comments must be received by March 8, 2018.

FINRA Regulatory Notice 18-02 is available here.

©2019 Katten Muchin Rosenman LLP


About this Author

Kevin M. Foley, Finance Lawyer, Katten Llaw Firm

Kevin M. Foley has extensive experience in commodities law and advises a wide range of clients, both in the United States and abroad, on compliance with the Commodity Exchange Act and the rules of the Commodity Futures Trading Commission (CFTC) affecting traditional exchange-traded products, as well as the over-the-counter markets involving swaps and other derivative instruments. His clients include futures commission merchants, derivatives clearing organizations, designated contract markets, foreign boards of trade and an industry trade association.



Timothy Kertland concentrates his practice on transactional, corporate and regulatory aspects of financial services matters. Timothy is able to provide legal services to a wide variety of clients including proprietary trading firms, hedge funds, broker-dealers, registered investment advisers, and commodity trading advisers.

While in law school, Timothy served as an editor of the Virginia Tax Review. As a first-year law student, he represented the University of Virginia School of Law at the National Transactional LawMeets Competition.