FINRA-Proposed Rule Change to Clarify the Classification and Reporting of Certain Securities

FINRA filed a proposed rule change to adopt an interpretation to clarify the classification and reporting of certain securities to FINRA. The proposed rule change aims to address the appropriate classification of "hybrid" securities for trade reporting purposes. According to FINRA, the hybrid securities have both debt and equity-like features, making their classification unclear. FINRA proposes an interpretation regarding the classification and reporting of the following two categories of hybrid securities:

• Depositary shares, which FINRA proposes to treat as OTC Equity Securities, as long as the relevant security is not listed on an equity facility of a national securities exchange.
• Capital trust securities (also referred to as trust preferred securities), which FINRA proposes to interpret as TRACE-Eligible Securities; e.g., as debt-like.

See: Text of Proposed Rule Change; FINRA Press Release.