TLDR
- Regulatory officials proposed narrowing Rule 15c2-11 to cover only equity securities traded in over-the-counter markets.
- This amendment would roll back the 2021 interpretation that brought fixed-income instruments under the rule’s jurisdiction.
- Officials established a 60-day window for stakeholders to submit feedback on the proposed changes.
- Commissioner Hester Peirce noted that temporary relief measures generated market confusion over recent years.
- Regulators specifically asked for public views on whether cryptocurrency assets qualify as equity securities.
The US Securities and Exchange Commission (SEC) has taken steps to overhaul a contentious broker-dealer disclosure requirement. Officials proposed restricting Rule 15c2-11 to equity instruments while soliciting stakeholder perspectives on digital assets. This regulatory action addresses market disruptions stemming from a 2021 policy shift affecting fixed-income trading.
SEC Proposes Amendment to Rule 15c2-11
Regulators announced plans to modify Rule 15c2-11 by restricting its application to equity instruments exclusively. Officials indicated this revision would rescind the 2021 policy expansion that encompassed fixed-income products.
The regulation, established in 1971, mandates that broker-dealers maintain accessible public data before publishing quotes for OTC securities. Authorities created this framework to combat fraudulent activities in penny stock trading and preserve market transparency.
During 2021, regulatory officials extended the rule’s reach to fixed-income instruments, encompassing government debt and corporate bonds. Industry participants expressed concerns that this expansion caused disruptions across bond trading platforms.
Regulators now propose clarifying that the rule governs equity instruments exclusively. Officials characterized equity securities as stock shares and similar instruments representing corporate ownership stakes.
The agency launched a 60-day consultation period following the announcement. Regulators indicated they seek stakeholder perspectives regarding how the framework should treat cryptocurrency assets and comparable financial products.
Crypto Definition and Interagency Coordination
Hester Peirce, SEC commissioner leading the crypto task force, expressed support for the proposal. She noted that regulatory actions beginning with a 2020 amendment and implemented in 2021 generated prolonged market confusion.
“By its terms, the text of Rule 15c2-11 always has applied to quotations of a ‘security,'” Peirce said. She observed that many market observers historically understood the regulation to govern OTC equity instruments exclusively.
Peirce said the Commission should have provided extended no-action relief during the fixed-income application review period. Instead, she noted the agency issued temporary relief measures, occasionally spanning just three months, which created persistent uncertainty.
She additionally requested stakeholder commentary on whether equity securities might encompass certain cryptocurrency products. “I am particularly interested in commenters’ views as to the questions about the definition of ‘equity security,'” she said.
Regulators have yet to determine whether digital securities fall within the equity instrument classification. Accordingly, officials invited feedback regarding implementation approaches and the possible establishment of an expert market framework.
Meanwhile, the SEC and the Commodity Futures Trading Commission executed a memorandum establishing coordinated supervision of financial markets, including cryptocurrency platforms. Both agencies stated this agreement would resolve longstanding jurisdictional conflicts.
Both regulatory bodies continue advancing clarity initiatives for digital asset markets under current leadership. The SEC will accept stakeholder submissions throughout the 60-day consultation window before proceeding with additional measures.
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