SEC Gives Bond Dealers 3-Month Reprieve

The U.S. Securities and Exchange Fee has delayed implementation of a rule revision meant to protect traders from “pump and dump” strategies amid fears about its potential impression on the bond markets.

The amendments to Exchange Act Rule 15c2-11, which the SEC adopted a yr in the past, have been thanks to go into effect on Tuesday. The revised rule enhances disclosure by generally prohibiting broker-dealers from publishing quotations for an issuer’s security when issuer information and facts is not latest and publicly available, matter to selected 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 right until Jan. 3, 2022 in response to indications from field associates that they would not be completely ready to comply by the original deadline.

Rule 15c2-11 was initially introduced in 1971 to safeguard retail buyers from predatory techniques in penny shares by demanding dealers to test that an array of economic info was up to date on each individual firm for which they quoted inventory rates.

The 2020 amendments shut loopholes that permitted broker-dealers to retain a quoted market for an issuer’s protection in perpetuity, in the absence of present and publicly available information about the issuer, and even when the issuer no more time exists.

The 1971 rule was not used to fixed-money securities but the SEC did not exempt them from the amendments, fueling consternation among the bond sellers who, in accordance to the Financial Moments, feared “they would need to prevent publishing quotations broadly on securities buying and selling platforms and instead revert to procedures this sort of as cell phone broking to prevent running afoul of the rule.”

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

“Nobody appears to be to have contemplated that this rule would impact the fixed-earnings marketplaces in a way unique from the pre-amendment model of the rule, significantly considerably less that its prerequisites most likely would render unviable specific current technological innovations in trading — innovations that have benefited traders and enhanced marketplace high quality,” she mentioned in a assertion.

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