FINRA Issues Interpretation to Clarify Classification and Trade Reporting of Certain "Hybrid" Securities (FINRA Regulatory Notice 14-23)
FINRA issued a regulatory notice to provide additional information on how trades in certain securities that have both debt- and equity-like features, or "hybrid" securities, must be reported.
Specifically, the SEC approved an interpretation regarding the appropriate trade reporting facility to which firms should report transactions in the following three types of hybrid securities:
- unlisted depositary shares having a liquidation preference of $1,000 or more;
- unlisted non-convertible, preferred securities having a liquidation preference of $1,000 or more; and
- unlisted capital trust securities (also referred to as trust preferred securities) (together, "covered hybrid securities").
In accordance with this interpretation, from June 16, 2014 firms will be required to report transactions in covered hybrid securities to the Trade Reporting and Compliance Engine ("TRACE"). However, firms may request the set-up of a new hybrid security for trade reporting purposes in accordance with this interpretation prior to that date. A list of covered hybrid securities that will be moved from the OTC Reporting Facility to TRACE on June 16, 2014, is attached as Appendix A to the regulatory notice.
See: FINRA Regulatory Notice 14-23.