Regulatory rundown
10 June 2025
Jonathan Tsang, head of business development EMEA at S&P Global Market Intelligence Cappitech, provides an overview on the current status of the upcoming SEC 10c-1a regulation
Image: stock.adobe.com/MINTED VasitChaya
The current state of SEC Rule 10c-1a
The US Securities and Exchange Commission (SEC) Rule 10c-1a, aimed at enhancing transparency in the securities lending market, faces significant legal and regulatory hurdles as the financial industry prepares for its implementation. While the SEC officially approved FINRA’s revised proposal under the Rule 6500 Series on 2 January 2025, there are still open questions around the implementation timelines and the published technical specifications.
Legal challenges to the rule
While the Financial Industry Regulatory Authority (FINRA) stated that it would formally ask the SEC for an extension to the go-live date of 2 January 2026, the most significant threat to the current implementation timeline comes from a lawsuit filed on 12 December 2023, by three industry associations: the National Association of Private Fund Managers (NAPFM), Alternative Investment Management Association (AIMA), and Managed Funds Association (MFA). The case is being heard in the US Court of Appeals for the Fifth Circuit.
The litigation challenges both Rule 10c-1a and another related SEC rule (13f-2) that requires reporting and public disclosure of short selling activity. According to the petitioners, these two rules, though finalised on the same day and regulating interconnected activities, impose inconsistent and contradictory reporting requirements.
Cross-border and extraterritoriality concerns
The implications of SEC 10c-1a are particularly pronounced for cross-border transactions, and this is certainly the most asked and debated question from clients. Non-US firms will need to assess this with their legal and compliance teams and decide whether they are required to comply with SEC 10c-1a in their jurisdictions.
We gathered insights from our audience in a recent webinar regarding their views on this topic. Notably, a significant 63 per cent of the audience responded affirmatively that non-US entities would be captured by the SEC 10c-1a rule. In contrast, 17 per cent believed they were not affected, while 20 per cent were uncertain. Since the conversations that we have had in the past year with clients, it does feel that the tide is turning around this point and non-US entities will need to report under SEC 10c-1a in certain scenarios.
Current implementation timeline
Despite this uncertainty, 2 January 2026 remains the go-live date for compliance with 10c-1a reporting requirements and, as it stands, it will certainly be challenging for participants to meet the deadline. FINRA stated that it would formally ask for an extension to the go-live date as the authority believes that launching a significant new reporting system, especially at the turn of the year, presents unnecessary risks, not to mention the obligatory code freezes that happen over the holiday period, which would certainly impact testing and implementation. From our audience in the aforementioned webinar, we asked whether participants would be able to meet the deadline, and almost 60 per cent of respondents answered no. With all of these factors, it points towards an extension, but until that is crystalised, participants will need to work towards the target date.
Collaboration is key
As we see with other reporting regimes, collaboration between industry associations and market participants helps to bring consensus and common understanding when interpreting the rules. From our perspective, we have formed a design group with Pirum, where we dive deeper into the analysis of 10c-1a, the latest regulatory updates, and tackling the challenges that the regulation presents. We saw the value from the Securities Financing Transactions Regulation (SFTR) implementation, as the design group provided clients a forum to collaborate and give input into the solution.
Through our analysis, we see a decent overlap with SFTR, which will help clients who implemented the regulation with their 10c-1a business requirements. We are applying our SFTR know-how and experience to help clients achieve 10c-1a compliance.
Conclusion
As the situation evolves, industry stakeholders should maintain flexible implementation strategies and continue to stay updated with the technical specifications. In the meantime, reporting requirements should continue to be evaluated along with where data should be sourced from, which systems are impacted, and any onboarding documentation needed by FINRA.
The US Securities and Exchange Commission (SEC) Rule 10c-1a, aimed at enhancing transparency in the securities lending market, faces significant legal and regulatory hurdles as the financial industry prepares for its implementation. While the SEC officially approved FINRA’s revised proposal under the Rule 6500 Series on 2 January 2025, there are still open questions around the implementation timelines and the published technical specifications.
Legal challenges to the rule
While the Financial Industry Regulatory Authority (FINRA) stated that it would formally ask the SEC for an extension to the go-live date of 2 January 2026, the most significant threat to the current implementation timeline comes from a lawsuit filed on 12 December 2023, by three industry associations: the National Association of Private Fund Managers (NAPFM), Alternative Investment Management Association (AIMA), and Managed Funds Association (MFA). The case is being heard in the US Court of Appeals for the Fifth Circuit.
The litigation challenges both Rule 10c-1a and another related SEC rule (13f-2) that requires reporting and public disclosure of short selling activity. According to the petitioners, these two rules, though finalised on the same day and regulating interconnected activities, impose inconsistent and contradictory reporting requirements.
Cross-border and extraterritoriality concerns
The implications of SEC 10c-1a are particularly pronounced for cross-border transactions, and this is certainly the most asked and debated question from clients. Non-US firms will need to assess this with their legal and compliance teams and decide whether they are required to comply with SEC 10c-1a in their jurisdictions.
We gathered insights from our audience in a recent webinar regarding their views on this topic. Notably, a significant 63 per cent of the audience responded affirmatively that non-US entities would be captured by the SEC 10c-1a rule. In contrast, 17 per cent believed they were not affected, while 20 per cent were uncertain. Since the conversations that we have had in the past year with clients, it does feel that the tide is turning around this point and non-US entities will need to report under SEC 10c-1a in certain scenarios.
Current implementation timeline
Despite this uncertainty, 2 January 2026 remains the go-live date for compliance with 10c-1a reporting requirements and, as it stands, it will certainly be challenging for participants to meet the deadline. FINRA stated that it would formally ask for an extension to the go-live date as the authority believes that launching a significant new reporting system, especially at the turn of the year, presents unnecessary risks, not to mention the obligatory code freezes that happen over the holiday period, which would certainly impact testing and implementation. From our audience in the aforementioned webinar, we asked whether participants would be able to meet the deadline, and almost 60 per cent of respondents answered no. With all of these factors, it points towards an extension, but until that is crystalised, participants will need to work towards the target date.
Collaboration is key
As we see with other reporting regimes, collaboration between industry associations and market participants helps to bring consensus and common understanding when interpreting the rules. From our perspective, we have formed a design group with Pirum, where we dive deeper into the analysis of 10c-1a, the latest regulatory updates, and tackling the challenges that the regulation presents. We saw the value from the Securities Financing Transactions Regulation (SFTR) implementation, as the design group provided clients a forum to collaborate and give input into the solution.
Through our analysis, we see a decent overlap with SFTR, which will help clients who implemented the regulation with their 10c-1a business requirements. We are applying our SFTR know-how and experience to help clients achieve 10c-1a compliance.
Conclusion
As the situation evolves, industry stakeholders should maintain flexible implementation strategies and continue to stay updated with the technical specifications. In the meantime, reporting requirements should continue to be evaluated along with where data should be sourced from, which systems are impacted, and any onboarding documentation needed by FINRA.
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