Treliant Takeaway…FINRA 4210 Implementation Date is Approaching

FINRA 4210 Margin Requirements

• Source: sec.gov; finra.org

Takeaway

Treliant helps global banking institutions manage the implementation date of the updated FINRA 4210 requirements which take effect May 22, 2024. Our team has deep experience helping our global banking clients prepare for and manage the complexity of regulatory change. We offer cost effective solutions to amend legal documentation in line with regulatory updates. Our experienced team efficiently implement and manage the outreach and negotiation process to ensure regulatory compliance.

Highlights

On July 27, 2023, the SEC approved amendments to the original FINRA 4210 requirements. The purpose of the amendment is to reduce the burden of margin collections requirements with respect to Covered Agency Transactions and was introduced in response to concerns raised that the original requirements favoured larger broker dealers.

Broadly, these amendments include three main changes:

• Elimination of the two percent maintenance requirements that the original rule applies to Covered Agency Transactions by non-exempt accounts. Therefore, regardless of a counterparty’s accounts status (exempt or non-exempt), members will collect margin for each counterparty’s excess mark to market loss, unless otherwise provided by the rule;
• In specified conditions, members can take a capital charge in lieu of collecting margin for excess mark to market losses on Capital Agency Transactions; and
• Streamlines and clarifies the Covered Transaction rule language including key exceptions to the requirements.

How This Impacts Financial Institutions

As a result of the updated FINRA 4210 requirements, financial institutions must assess if documentation updates are necessary. Specifically, Master Securities Forward Transaction Agreements will need to be reviewed to determine if the agreement terms are regulatory compliant. To ensure regulatory compliance, amendment agreements may need to be negotiated.