April 20, 2024

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SEC Gives Bond Dealers 3-Month Reprieve

The U.S. Securities and Exchange Fee has delayed implementation of a rule revision meant to guard buyers from “pump and dump” techniques amid fears over its possible impression on the bond markets.

The amendments to Exchange Act Rule 15c2-eleven, which the SEC adopted a year back, have been because of to go into effect on Tuesday. The revised rule enhances disclosure by typically prohibiting broker-dealers from publishing quotations for an issuer’s safety when issuer information is not existing and publicly offered, subject to sure exceptions.

But in a “no-action” letter, Josephine Tao, assistant director of the SEC’s Division of Investing and Marketplaces, explained the rule would not be enforced till Jan. three, 2022 in reaction to indications from sector associates that they would not be all set to comply by the initial deadline.

Rule 15c2-eleven was to start with introduced in 1971 to guard retail buyers from predatory techniques in penny shares by requiring dealers to check out that an array of financial information was up to day on every enterprise for which they quoted inventory costs.

The 2020 amendments shut loopholes that authorized broker-dealers to preserve a quoted marketplace for an issuer’s safety in perpetuity, in the absence of existing and publicly offered information about the issuer, and even when the issuer no extended exists.

The 1971 rule was not used to fixed-profits securities but the SEC didn’t exempt them from the amendments, fueling consternation amongst bond dealers who, according to the Financial Occasions, feared “they would require to end publishing rates broadly on securities buying and selling platforms and instead revert to methods such as phone broking to avoid jogging afoul of the rule.”

Commissioner Hester Pierce explained the three-thirty day period hold off in enforcement was “wholly inadequate” to forestall “the perhaps major unfavorable outcomes of these amendments on buying and selling in the fixed-profits marketplace.”

“Nobody seems to have contemplated that this rule would influence the fixed-profits markets in a way distinct from the pre-amendment version of the rule, much less that its necessities perhaps would render unviable sure recent technological improvements in buying and selling — improvements that have benefited buyers and improved marketplace good quality,” she explained in a statement.

bond markets, Preset Money, Pump and dump, Rule 15c2-eleven, U.S. Securities and Exchange Fee