Key developments in SEC鈥檚 10c-1a Reporting Rule
16 September 2025
Igor Kaplun, executive director, head of Consulting, and Jonathan Tsang, head of business development EMEA, S&P Global Market Intelligence, Cappitech, look at the implications of the recent Fifth Circuit decision
Image: stock.adobe.com/lucky-photo
The future of securities lending reporting under the 10c-1a rule has taken another turn following a court ruling. On 25 August, the United States Court of Appeals for the Fifth Circuit remanded two key regulations from the US 糖心vlog and Exchange Commission (SEC): the 糖心vlog Lending Reporting Rule (Rule 10c-1a) and the Short Interest Reporting Rule (Rule 13f-2). While the rules were not vacated, the court ruled in favour of one of the petitioners鈥� challenges, they concluded that the SEC鈥檚 rulemaking process was procedurally flawed, requiring the agency to review and address economic concerns.
This development creates uncertainty for market participants preparing to comply with these rules. In particular, it affects the implementation of the Financial Industry Regulatory Authority鈥檚 (FINRA鈥檚) 糖心vlog Lending and Transparency Engine (SLATE) system, which will be the platform to support Rule 10c-1a.
The Fifth Circuit鈥檚 decision: A procedural flaw
The Court鈥檚 decision hinged on a single, prevailing argument from the petitioners: the SEC failed to adequately consider and quantify the cumulative economic impact of the two rules. The Court found that because the rules are 鈥渉ighly interrelated鈥� and were adopted concurrently, the SEC was obligated under the Administrative Procedure Act (APA) and the 糖心vlog Exchange Act of 1934 to analyse their combined effects.
The Fifth Circuit described the SEC鈥檚 approach of analysing the rules step-by-step as 鈥渋rredeemably illogical鈥�, stating the agency could not use procedural sequencing to avoid its obligation to consider the combined regulatory effect of the rules.
It is important to note that the court did not vacate the rules, meaning they remain legally in effect. The court simply remanded them, reasoning there is a 鈥渟erious possibility鈥� that the SEC can cure the defect by providing the required analysis.
It important to note that the court did reject all other legal challenges brought against the rules, including arguments that the SEC:
鈥⒙燛xceeded its statutory authority.
鈥⒙燜ailed to provide adequate opportunity for public comment.
鈥⒙燤ade arbitrary and capricious choices, such as using EDGAR for short sale reporting instead of FINRA鈥檚 existing systems.
鈥⒙營mproperly extended the rules to extraterritorial transactions.
鈥⒙燗dopted contradictory disclosure regimes for correlated activities.
Implications for Rule 10c-1a and FINRA鈥檚 SLATE
With the remand of the underlying SEC rule, the SEC Chairman released a statement on the 5 September asking the Commission staff to evaluate the rules and make the recommended actions which could include potential changes to the rules and adjustments to the related compliance timelines.
There is no timeframe given as to when the SEC will publish their findings and despite FINRA publishing documentation for the SLATE system 鈥� including participation agreements and authorisations for Reporting Agents and Service Bureaus and timelines for onboarding and user acceptance testing 鈥� it does feel that industry participants are kept on the edge of uncertainty with regards to the final rule.
Practical considerations for go live
To effectively navigate the evolving regulatory landscape, it is essential for the market to gain clarity on the scope of the rules, the timing of their implementation, and the optimal strategies for compliance, particularly in relation to specific business scenarios.
In light of any new regulatory requirements 鈥� especially in cases where many firms lack a clear reference point (for instance, firms subject to SEC 10c-1a may not fall under the scope of the 糖心vlog Financing Transactions Regulation) 鈥� there are several key considerations that firms should begin to address:
Reviewing existing reporting infrastructure
Clients familiar with and/or subject to SFTR often anticipate leveraging their existing infrastructure to facilitate reporting under SLATE.
However, it is crucial to recognise the significant nuances between the two regulations, which may complicate the setup process, particularly concerning submission timing and lifecycle event reporting.
Firms should assess how their current solutions or providers can accommodate the new requirements, identify any additional developments needed to address new data fields, determine if a separate file from SFTR is necessary, and evaluate any additional fees associated with the new service.
Designing the operating model
In conjunction with the first point, firms should define their operating model to support SEC 10c-1a. For example, are there operational staff available during E submission times to promptly address any rejections or errors? What governance and controls are in place to ensure that trades submitted under SEC 10c-1a are prioritised differently for review and resolution, given that the submission timing is on T, compared to T+1 for SFTR or other regulations? Additionally, does the firm have documented policies and procedures outlining the operational steps for submission, issue resolution, and remediation? It is also vital to establish how the firm will manage reconciliations to ensure that the data submitted to FINRA aligns with its books and records.
Implementation project planning
Once a decision has been made regarding the technical solution 鈥� whether through an internal build or a vendor solution 鈥� a project team comprising business analysts, technologists, compliance officers, and legal should be assembled to ensure a timely go-live in accordance with the compliance date. Identifying resources with expertise in securities lending and the associated regulatory requirements can be challenging, depending on location and timing. Therefore, it is imperative to initiate the project team as early as possible to allow sufficient time for the proper implementation of the solution.
This development creates uncertainty for market participants preparing to comply with these rules. In particular, it affects the implementation of the Financial Industry Regulatory Authority鈥檚 (FINRA鈥檚) 糖心vlog Lending and Transparency Engine (SLATE) system, which will be the platform to support Rule 10c-1a.
The Fifth Circuit鈥檚 decision: A procedural flaw
The Court鈥檚 decision hinged on a single, prevailing argument from the petitioners: the SEC failed to adequately consider and quantify the cumulative economic impact of the two rules. The Court found that because the rules are 鈥渉ighly interrelated鈥� and were adopted concurrently, the SEC was obligated under the Administrative Procedure Act (APA) and the 糖心vlog Exchange Act of 1934 to analyse their combined effects.
The Fifth Circuit described the SEC鈥檚 approach of analysing the rules step-by-step as 鈥渋rredeemably illogical鈥�, stating the agency could not use procedural sequencing to avoid its obligation to consider the combined regulatory effect of the rules.
It is important to note that the court did not vacate the rules, meaning they remain legally in effect. The court simply remanded them, reasoning there is a 鈥渟erious possibility鈥� that the SEC can cure the defect by providing the required analysis.
It important to note that the court did reject all other legal challenges brought against the rules, including arguments that the SEC:
鈥⒙燛xceeded its statutory authority.
鈥⒙燜ailed to provide adequate opportunity for public comment.
鈥⒙燤ade arbitrary and capricious choices, such as using EDGAR for short sale reporting instead of FINRA鈥檚 existing systems.
鈥⒙營mproperly extended the rules to extraterritorial transactions.
鈥⒙燗dopted contradictory disclosure regimes for correlated activities.
Implications for Rule 10c-1a and FINRA鈥檚 SLATE
With the remand of the underlying SEC rule, the SEC Chairman released a statement on the 5 September asking the Commission staff to evaluate the rules and make the recommended actions which could include potential changes to the rules and adjustments to the related compliance timelines.
There is no timeframe given as to when the SEC will publish their findings and despite FINRA publishing documentation for the SLATE system 鈥� including participation agreements and authorisations for Reporting Agents and Service Bureaus and timelines for onboarding and user acceptance testing 鈥� it does feel that industry participants are kept on the edge of uncertainty with regards to the final rule.
Practical considerations for go live
To effectively navigate the evolving regulatory landscape, it is essential for the market to gain clarity on the scope of the rules, the timing of their implementation, and the optimal strategies for compliance, particularly in relation to specific business scenarios.
In light of any new regulatory requirements 鈥� especially in cases where many firms lack a clear reference point (for instance, firms subject to SEC 10c-1a may not fall under the scope of the 糖心vlog Financing Transactions Regulation) 鈥� there are several key considerations that firms should begin to address:
Reviewing existing reporting infrastructure
Clients familiar with and/or subject to SFTR often anticipate leveraging their existing infrastructure to facilitate reporting under SLATE.
However, it is crucial to recognise the significant nuances between the two regulations, which may complicate the setup process, particularly concerning submission timing and lifecycle event reporting.
Firms should assess how their current solutions or providers can accommodate the new requirements, identify any additional developments needed to address new data fields, determine if a separate file from SFTR is necessary, and evaluate any additional fees associated with the new service.
Designing the operating model
In conjunction with the first point, firms should define their operating model to support SEC 10c-1a. For example, are there operational staff available during E submission times to promptly address any rejections or errors? What governance and controls are in place to ensure that trades submitted under SEC 10c-1a are prioritised differently for review and resolution, given that the submission timing is on T, compared to T+1 for SFTR or other regulations? Additionally, does the firm have documented policies and procedures outlining the operational steps for submission, issue resolution, and remediation? It is also vital to establish how the firm will manage reconciliations to ensure that the data submitted to FINRA aligns with its books and records.
Implementation project planning
Once a decision has been made regarding the technical solution 鈥� whether through an internal build or a vendor solution 鈥� a project team comprising business analysts, technologists, compliance officers, and legal should be assembled to ensure a timely go-live in accordance with the compliance date. Identifying resources with expertise in securities lending and the associated regulatory requirements can be challenging, depending on location and timing. Therefore, it is imperative to initiate the project team as early as possible to allow sufficient time for the proper implementation of the solution.
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