JA 2021-0009.pdf

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

SEC HEADQUARTERS

100 F STREET NE

WASHINGTON, DC 20549

OFFICE OF

ACQUISITIONS

JUSTIFICATION FOR OTHER THAN FULL AND OPEN COMPETITION

J&A Number 2021-0009 (Revised) eFOCUS

Upon the basis of the following justification as required by FAR 6.303-1(a), I hereby approve the issuance of the contractual action discussed below using other than full and open competition, pursuant to the authority cited herein.

1. Agency and Contracting Activity:

U.S. Securities and Exchange Commission (“SEC” or “Commission”) Office of Acquisitions 100 F Street, NE Washington, DC 20549

2. Nature and description of action being approved.

This anticipated action is a sole source contract award with Financial Industry Regulatory Authority, Inc.

(“FINRA”).

This contract will consist of Labor Hour (LH) and/or Firm Fixed Price (FFP) CLINs and an estimated period of performance of one (1) base period of 12 months and nine (9) options periods of 12 months each.

3. A description of the supplies or services required to meet the agency’s needs.

On September 19, 2019, the Commission adopted rules that will, among other things, require broker-dealers and stand-alone SBSEs to file revised FOCUS Report Part II with “the Commission or its designee” and require bank SBSEs to file new FOCUS Report Part IIC with “the Commission or its designee.”1 The FOCUS Report will be used by registrants to report financial and operational information. Revised FOCUS Report Part II is available on pages 68672-68721 of the Recordkeeping Adopting Release. New FOCUS Report Part IIC is available on pages 68722-68733 of the Recordkeeping Adopting Release.

More specifically, the contract will provide the SEC with:

• The filing of Form X-17A-5 (“FOCUS Report”) Part IIC by bank security-based swap dealers and bank major security-based swap participants (collectively, “bank SBSEs”) on FINRA’s eFOCUS system;

• The filing of FOCUS Report Part II by non-broker-dealer non-bank security-based swap dealers and non-broker-dealer non-bank major security-based swap participants (collectively, “stand-alone SBSEs”) on FINRA’s eFOCUS system;

1 See Recordkeeping and Reporting Requirements for Security-Based Swap Dealers, Major Security-Based Swap Participants, and

Broker-Dealers, Exchange Act Release No. 87005 (Sept. 19, 2019), 84 FR 68550 (Dec. 16, 2019), available at https://www.govinfo.gov/content/pkg/FR-2019-12-16/pdf/2019-20678.pdf (“ Recordkeeping Adopting Release”).

https://www.govinfo.gov/content/pkg/FR-2019-12-16/pdf/2019-20678.pdf

J&A No. 2020-0009 (Revised)

• Ancillary ongoing services associated with these filings (e.g., system updates, servicing filer accounts, Help Desk availability);

• Transmission to the SEC of the data in the FOCUS Report Part IIC filings by bank SBSEs; and

• Transmission to the SEC of the data in the FOCUS Report Part II filings by stand-alone SBSEs.

FINRA-supervised broker-dealers currently file various parts (e.g., Parts II and IIA) of the FOCUS Report electronically on FINRA’s eFOCUS system. These firms are required to file the FOCUS Report on the eFOCUS system pursuant to FINRA’s plan, the procedures and provisions of which have been submitted to and declared effective by the Commission pursuant to Securities Exchange Act (“Exchange Act”) Rule 17a- 5 (17 CFR 240.17a-5). FINRA also provides ancillary ongoing services associated with these filings, such as updating the eFOCUS system, servicing filer accounts, and a Help Desk for filers. To facilitate the SEC’s requests for the information in these FOCUS Report filings, SEC staff can review filings through the eFOCUS system, or through Datamart, a structured database maintained by the SEC, after downloading the Focus feed from FINRA’s SFTP website.

The contract would retain FINRA to provide for the filing of the FOCUS Report by stand-alone SBSEs and bank SBSEs 2 on the same eFOCUS system used by broker-dealers, ancillary ongoing services comparable to those provided for FINRA-supervised broker-dealers, and the transmission of the data in these filings using the same Datamart, Focus feed, and SFTP website used to transmit broker-dealer FOCUS Report data to the SEC.

The anticipated value of this acquisition is $8,018,800.00 inclusive of all options.

4. The statutory authority permitting other than full and open competition.

This sole source justification is authorized by 41 U.S.C. 253 (c)(1) and FAR Subpart 6.302-1(b)(1)(i).

41 U.S.C. 253 (c)(1) cites “An executive agency may use procedures other than competitive procedures only when…The property or services needed by the executive agency are available from only one responsible source and no other type of property or service will satisfy the needs of the executive agency.”

The statutory authority permitting other than full and open competition is 41 U.S.C. 3304(a)(1) and FAR 6.302-1. Only one responsible source and no other supplies or services will satisfy agency requirements.

5. A demonstration that the proposed contractor’s unique qualifications or the nature of the acquisition requires use of the authority cited.

Under the securities laws, FINRA is a Self-Regulatory Organization (SRO) whose member broker-dealers are required pursuant to paragraph (a)(4) of Exchange Act Rule 17a-5 (17 CFR 240.17a-5) to submit filings such as FOCUS Report Part II through FINRA’s owned and operated eFOCUS system. As such, FINRA is uniquely qualified to provide the Commission with a consolidated platform for stand-alone SBSEs and bank SBSEs (who are not supervised by FINRA) to file the FOCUS Report, uniform ancillary ongoing services associated with these filings, and a consolidated platform for transmitting this data for the SEC. In particular, the Commission identified the following unique qualifications of the FINRA solution:

First, FINRA-supervised broker-dealers currently file the FOCUS Report through FINRA’s eFOCUS system, as required pursuant to paragraph (a)(4) of Exchange Act Rule 17a-5 (17 CFR 240.17a-5). SEC staff anticipates many firms that register as non-FINRA supervised stand-alone SBSEs and bank SBSEs will be affiliated with broker-dealers that currently use the eFOCUS system. FINRA’s eFOCUS system is unique in that it enables dual-hatted employees working for the broker-dealer and non-broker-dealer entities

2 Stand-alone SBSEs and bank SBSEs will not be supervised by FINRA.

to file both entities’ FOCUS Reports on the same platform using the same preexisting templates, software, and procedures currently used by the broker-dealer.

Second, by designating FINRA to receive FOCUS Reports from stand-alone and bank SBSEs, FINRA is uniquely able to transmit the data in the FOCUS Report filings by broker-dealers and non-broker-dealer SBSEs in a consolidated data transmission. Thus, SEC staff are able to compare data between these different types of entities in the same database and monitor these registrants more effectively.

Third, if FINRA is not designated to receive FOCUS Report filings from stand-alone and bank SBSEs, a separate, parallel filing system would need to be created only for non-FINRA supervised filers, which would create complexity and redundancy because the same information for required filers would be located on two different filing systems. This, in turn, could create unnecessary confusion and uncertainty for filers.

It might also inadvertently result in different treatment of different entities simply based on which filing system the entity is assigned to use.

6. A description of efforts to ensure that offers were solicited from as many potential sources as is practicable. Include whether or not a FedBizOpps announcement was made and what response, if any, was received, or include the exception under FAR 5.202 if not synopsizing.

The action will be synopsized in the Federal Business Opportunities website per 41 U.S.C. §§ 253 and 416, and FAR Subpart 5.2. The Office of Acquisitions (OA) will post a special notice on Federal Business Opportunities (www.FBO.gov) clearly indicating its intent to enter into a contractual agreement with

FINRA.

7. A determination by the contracting officer that the anticipated cost to the Government will be fair and reasonable.

The Contracting Officer, by signature on this document, hereby determines that the anticipated cost to the government will be fair and reasonable.

8. A description of the market research conducted and the results.

The Commission conducted market research into solutions capable of supporting the use cases discussed in Section 1 above. This research indicated the strong advantages of utilizing the existing system provider used by broker-dealers to file the FOCUS Report. While the SEC considered EDGAR, an existing application, as a possible filing system, this option was deemed incapable of fully satisfying SEC requirements due to loss of a consolidated system for both broker-dealer and non-broker-dealer filers and the ability to reasonably compare the data in FOCUS Report filings between broker-dealer and non-broker-dealer filers. The SEC also considered direct receipt of FOCUS Report filings at SEC headquarters but determined this approach would cause significant disruption to SEC operations because of the personnel costs associated with receiving, tracking, scanning (if received by paper), organizing, and storing FOCUS Report filings. In addition, these alternatives would require the creation of a separate, parallel filing system for non-FINRA supervised filers, thus creating unnecessary complexity and redundancy and failing to meet the SEC’s need.

9. Any other facts supporting the use of other than full and open competition.

Refer to Section 5.

10. A listing of any sources that expressed a written interest in the acquisition.

No sources have expressed a written interest in the acquisition. See Section 5 for a discussion of the eFOCUS system. No other source besides FINRA is capable of addressing the SEC’s requirement.

11. A statement of any actions the agency may take to remove or overcome any barriers to competition, if subsequent acquisitions are anticipated.

No subsequent acquisitions are planned at this time. However, the data contained within the database is proprietary to the SEC and a transition to another vendor will be protected by the pending contract, so that flexibility exists to contract with an alternative vendor should the contract with FINRA be terminated.