Document ID: SEC-2020-0786-0001
Agency: sec
Document Type: Notice
Title: 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
Posted Date: 2020-05-19T04:00Z

[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