FINRA Clarifies Reporting Requirements for Tier 1 Capital Securities


Three Types of Hybrid Securities Subject to Classification and Reporting Changes -

For some time now, there has been confusion regarding the appropriate trade reporting for certain hybrid securities. Hybrid securities, such as non-cumulative perpetual preferred securities and depositary shares, have certain features typically associated with equity securities and certain features typically associated with debt securities. Traditionally, trust preferred securities and non-cumulative perpetual securities were reported to FINRA’s Trade Reporting and Compliance Engine (“TRACE”) system (as debt securities).

Following the enactment of the Dodd-Frank Act and the implementation of the Basel III capital rules in the United States, trust preferred securities and other “innovative” hybrid securities that once qualified for favorable regulatory capital treatment have generally been phased out. Banks have instead come to rely upon the issuance of non-cumulative preferred stock to raise Tier 1-qualifying capital. Increased issuance activity may have led FINRA to revisit the manner in which hybrid securities transactions should be trade reported.

Please see full alert below for more information.

LOADING PDF: If there are any problems, click here to download the file.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP | Attorney Advertising

Written by:


Morrison & Foerster LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.