by Howard Haykin ]

With SEC approval in hand, FINRA Rule 4524, Supplemental FOCUS Information, are set to kick off.  All we need is a starter's pistol.  The initial supplemental schedule disclosing off-balance sheet information will apply to the period ending 6/30/13.  And that initial schedule must be filed with FINRA on or before 7/31/13.

The ABC's of the "OBS".   FINRA Rule 4524 requires each firm, as FINRA shall designate, to file additional financial or operational schedules or reports.  The SEC has approved the adoption of a supplemental schedule for derivatives and other off-balance sheet items ("OBS") that applies to carrying or clearing firms.  The initial OBS disclosing a carrying or clearing firm’s OBS information as of 6/30, is due no later than 7/31.  

The OBS can be found at www.finra.org/notices/13-10 - in a 4-pp document.

Value Derived from the OBS.    The information will allow FINRA to obtain more comprehensive and consistent information regarding carrying and clearing firms’ off-balance sheet assets, liabilities and other commitments. 

• The OBS requires firms to report their gross exposures in financing transactions:

   ►  e.g., reverse repos, repos and other transactions that are otherwise netted under GAAP, reverse repos and repos to maturity and collateral swap transactions;

   ►  interests in and exposure to variable interest entities;

   ►  nonregular way settlement transactions - including to be announced or TBA securities and delayed delivery/settlement transactions; 

   ►  underwriting and other financing commitments; and,

   ►  gross notional amounts in centrally cleared and non-centrally cleared derivative transactions.
 

• The OBS also includes instructions that provide definitions and guidance with respect to the information required to be reported
   
• The OBS contains a de minimis exception for each reporting period. If the aggregate of all gross amounts of off-balance sheet items is less than 10% of the firm’s excess net capital on the last day of the reporting period, the firm will not be required to file the OBS for the reporting period.

     ►  A firm that claims the de minimis exception must affirmatively indicate through the eFOCUS system that no filing is required for the reporting period.

Only when a Carrying or Clearing Firm meets the de minimis exception as described above, it is required to file the OBS disclosing off-balance sheet information as of the last day of a reporting period within 22 business days of the end of each calendar quarter using the eFOCUS system available through FINRA’s Firm Gateway. Firms must use their current FINRA entitlement user ID and password to access the Firm Gateway.
 

Questions regarding access to the Firm Gateway should be directed to the firm’s Super Account Administrator (SAA).

FINRA Staff Contacts.   Direct questions concerning this Notice to:   Kris Dailey, VP, Risk Oversight & Operational Regulation (ROOR), at (646) 315-8434;  Marshall Levinson, VP, ROOR, at (646) 315-8453; or   Matthew Vitek, Asst Genl Counsel, Office of General Counsel,  at (202) 728-8156.

For further details, go to:   [  FINRA RegNote 13-10, March 2013 ].