SEC Proposes Changes to Over-the-Counter Broker-Dealer Rule

The US Securities and Exchange Commission (SEC) has taken steps to clarify its rules regarding over-the-counter (OTC) broker-dealers. A proposed amendment to Rule 15c2-11 would limit the scope of reporting requirements for these firms, which would exclude fixed-income securities from being quoted on the OTC market.

Rule 15c2-11 was first adopted in 1971 as part of efforts to reduce fraud in the penny stock market. The rule requires broker-dealers to maintain up-to-date public information about issuers before quoting their securities on the OTC market. However, a reinterpretation of the rule in 2021 led to uncertainty over its application to fixed-income securities.

Under the proposed amendment, the SEC would revert back to its original interpretation of the rule, which applies only to equity securities. The change would also bring clarity to the application of the rule to crypto assets, which are currently a grey area in US regulations.