On October 30, 2023, the US Securities Exchange Commission (the “SEC”) issued an order granting broker-dealers exemptive relief from Rule 15c2-11 (the “Rule 15c2-11”) under the US Securities Exchange Act of 1934 (the “Exchange Act”) for fixed-income securities sold in compliance with Rule 144A under the US Securities Act of 1933 (the “Rule 144A”).
As a result, the requirement to make certain information set forth in Rule 15c2-11 in regards to Rule 144A fixed-income securities offerings will no longer apply. This relief is notable as Rule 15c2-11 typically necessitates that broker-dealers have a reasonable belief that the issuer of the security is not in violation of the securities laws, as well as an expectation to review certain specified issuer information.
The SEC’s recent decision points to an evolving stance on the regulation of fixed income securities, potentially allowing for greater flexibility and fluidity in the trading of these assets. To fully comprehend the implications of this change, it is crucial to understand the context and function of Rule 15c2-11 and Rule 144A within the securities landscape.
- Rule 15c2-11: Under the Exchange Act, Rule 15c2-11 prohibits broker-dealers from publishing quotations for a security in any quotation medium, unless they have gathered and reviewed specific issuer information. In essence, this rule aids in ensuring transparency and minimizing fraudulent or manipulative acts in the securities marketplace.
- Rule 144A: A safe harbor exemption from the requirements of the Securities Act, Rule 144A allows for the sale of securities to certain institutional investors without the need to register the securities with the SEC. However, these transactions were not previously exempted from the public information requirement under Rule 15c2-11.
This recent move by the SEC underscores the importance of the application of these rules and serves to heighten awareness of the evolving legal landscape surrounding securities trading. As the implications of this order unfold, legal professionals should factor this discretion into their compliance strategies and consider potential impacts on securities offerings under Rule 144A.
For the full report on this matter, refer to the article at JD Supra.