15c2-11 Update: Bill Looks to Codify Fixed-Income Exemption

February 5, 2024

On Jan. 26, Rep. Alex Mooney (R-WV) and Sen. Bill Hagerty (R-TN) introduced legislation supported by CREFC that would permanently exempt fixed-income securities from the SEC’s rule 15c2-11.

Why it matters: Rule 15c2-11 requires broker dealers to verify certain issuer information is publicly available before quoting over-the-counter (OTC) securities.

  • The rule, introduced in 1971, looked to protect retail investors participating in the penny stock market and had been exclusively applied to equities.
  • In 2021, the SEC staff took a new stance, saying that 15c2-11 applied to fixed-income securities, including the private issue 144A market.
  • While the SEC granted several temporary reprieves, CREFC and other advocates were able to secure an SEC order in October 2023 exempting 144A bonds from 15c2-11 requirements.
  • Quotes for OTC non-144A fixed-income securities may need to comply with 15c2-11, as the November 2022 No Action Letter expired in January 2025.

What they’re saying: While the latest SEC order on 144A does not have an expiration, the legislation would enshrine a fixed-income exemption into statute and prevent the SEC from expanding the disclosure regime.

  • According to FINRA’s annual regulatory oversight report, broker-dealers are expected to comply with 15c2-11 in quoting OTC fixed-income securities. The FINRA report is silent on 144A.
  • Even if the non-144A securities information is public, broker-dealers may be expected to have compliance systems in place to verify the information.
  • The bills, H.R. 7092 and S. 3676, do not yet have Democratic co-sponsors in either chamber, though Democrats have been critical of the SEC on this issue.

Yes, but: The bill would not prevent the SEC from conducting a separate rulemaking on the 144A regulations to reexamine any public disclosure requirements. While reopening 144A has not been publicly telegraphed, SEC Chairman Gary Gensler has been expanding the scope of public disclosure in traditionally private markets.

The bottom line: While the proposed legislation would help provide lasting clarity to the fixed-income market on this issue, its passage may be challenged by a divided government.

Contact David McCarthy (dmccarthy@crefc.org) with any questions.


David McCarthy
Managing Director, Head of Policy

The information provided herein is general in nature and for educational purposes only. CRE Finance Council makes no representations as to the accuracy, completeness, timeliness, validity, usefulness, or suitability of the information provided. The information should not be relied upon or interpreted as legal, financial, tax, accounting, investment, commercial or other advice, and CRE Finance Council disclaims all liability for any such reliance. © 2023 CRE Finance Council. All rights reserved.

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