(Article from Registered Funds Regulatory Update, January 2023)
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In 2020, the Securities and Exchange Commission amended Rule 15c2-11 under the Exchange Act to prohibit broker-dealers from providing price quotations in over-the-counter securities unless specified information about the issuer of the securities is current and publicly available. Notably, in 2021, the SEC clarified that amended Rule 15c2-11 applies to debt securities issued in private offerings pursuant to Rule 144A and Regulation S under the Securities Act, in addition to equity securities. Pursuant to this clarification, issuers of these privately-placed debt securities, many of which are not public reporting companies under the Exchange Act, will face a choice between significantly expanding the scope of information they make public to enable broker-dealers to continue to provide price quotations, or, alternatively, risking reduced liquidity (and a corresponding negative impact on price) in the markets for such securities.
Exchange Act Rule 15c2-11 was adopted to address fraudulent behavior generally associated with stock trading in the over-the-counter (OTC) market. Under the amendments, broker-dealers may not publish a quotation for an issuer’s security when key information is not current and publicly available. Since the adoption of the amendments to Rule 15c2-11, concerns have been raised regarding the negative impact the amendments have on trading in the fixed-income markets and the inability of market participants to complete the operational and system changes required to comply with the amendments. The original compliance date for amended Rule 15c2-11 was September 28, 2021, which was extended to January 4, 2023 for issuers of fixed income securities. Following
requests from market participants for additional relief, on November 30, 2022, the SEC issued a no-action letter temporarily extending the compliance date for issuers of fixed income securities to January 4, 2025.
SEC Division of Trading and Markets, No-Action Letter, Amended Rule 15c2-11 in Relation to Fixed Income Securities (Nov. 30, 2022), available at: https://www.sec.gov/files/fixed-income-rule-15c2-11-nal-finra-113022.pdf.