FINRA is seeking comment on proposed amendments to FINRA Rule 4521 (Notifications, Questionnaires and Reports) that would require specified member firms to notify FINRA no more than 48 hours after specified events that may signal an adverse change in liquidity risk.
FINRA also seeks comment on a proposed new Supplemental Liquidity Schedule (SLS) that member firms with the largest customer and counterparty exposures would file as a supplement to the FOCUS Report. On the new SLS, these firms would report information related to specified financing transactions and other sources or uses of liquidity. The information would include among other things financing term, collateral types and large counterparties.
FINRA believes that effective monitoring of liquidity and funding risks is an essential element of firms’ financial responsibility and an ongoing focus for FINRA’s financial supervision programs. To that end, FINRA issued Regulatory Notice 18-02 to seek comment on proposed amendments to FINRA Rule 4521 (Notifications, Questionnaires and Reports) and on a new SLS that specified member firms would file as a supplement to the FOCUS Report.
The proposed rule amendments and the new SLS, in combination, are tailored requirements that will improve FINRA’s ability to monitor for events that signal an adverse change in the liquidity risk of the firms that would be subject to the new requirements.