SEC Indefinitely Extends15C2-11 Relief for Fixed Income
November 26, 2024
The Securities and Exchange Commission issued a new No Action Letter (NAL) on Nov. 22 that indefinitely extends existing 15c2-11 relief for fixed-income securities. CREFC has worked with the SEC, Congress, and other industry groups over the past few years to prevent the rule from being applied to fixed-income.
Background: The 15c2-11 rule requires broker-dealers to verify that certain issuer information is publicly available prior to quoting a price on over-the-counter (OTC) securities. The 1970s-era rule always had been interpreted to apply only to equities until a 2021 staff NAL letter stated the rule also included fixed-income.
- 144A Exempted: The SEC staff previously tried to apply 15c2-11 to 144A bonds, which do not have public reporting requirements. The SEC issued an exemptive order in October 2023 that clarified broker-dealers did not have to verify public information for 144A bonds. The exempted fixed-income securities include SASB CMBS and CRE CLOs.
- January Deadline: But the exemptive order purposefully did not include public fixed-income bonds, such as CMBS, and the 2022 NAL was set to expire on Jan. 4, 2025. Broker-dealers, therefore, would have to verify certain public issuer information in order to quote bonds.
- Industry groups have been seeking relief on the 15c2-11 requirements for fixed-income, as the SEC has never addressed how key components of the rule applied to the sector. Furthermore, the application of 15c2-11 to fixed-income securities did not go through an official rulemaking process and did not benefit from industry feedback.
What they're saying: During CREFC’s D.C. Symposium on Nov. 13, SEC Commissioner Hester Peirce previewed this result when in response to a 15c2-11 question she shared that, speaking for herself and not the SEC, she “was hopeful we can extend [the no-action relief]” and that in the future an appropriate rulemaking process would be undertaken.
Please contact Sairah Burki (sburki@crefc.org) with questions.