U.S. House Financial Services Committee members raise concerns over policy change; urge SEC to seek public input.
WASHINGTON, D.C. - Today, the American Securities Association (ASA) applauded numerous bipartisan members of the House Financial Services Committee, led by Reps. David Kustoff (R-NY) and French Hill (R-AR), for sending a letter to the U.S. Securities and Exchange Commission (SEC) regarding an announcement concerning Rule 15c2-11 and implications for Rule 144A debt offerings.
“While ASA appreciates the SEC staff no-action letter from December 2021 on 15c2-11, applying this rule to fixed income would be a significant change to the SEC’s current rule set,” ASA Head of Government Affairs Kelli McMorrow said. “We strongly recommend the SEC issue a formal rulemaking proposal under the Administrative Procedure Act prior to making this type of substantive policy change to the corporate bond market.”
“ASA is concerned the SEC’s policy will impact fixed income market liquidity, including those offerings that fall under Rule 144A. We applaud the bipartisan members of the Financial Services Committee for asking the SEC to seek public feedback on this issue.”
The congressional letter to the SEC states “rule 144A offerings are a key part of the debt capital markets, providing liquidity, competitive pricing, and opportunities to help many companies – including privately held companies – the chance to create jobs, grow and innovate.” And according to McMorrow, “not only do fixed income markets function much differently than equity markets but rules are already in place to protect investors. So, we question why this change is necessary.”
In October 2021, ASA sent a letter to SEC Chairman Gary Gensler, ASA CEO Chris Iacovella outlined the organization’s support for Rule 15c2-11 and the increased transparency it provides to retail investors in the over-the-counter (OTC) equity market. ASA felt the SEC’s operational application of the Rule to fixed income markets had not been fully considered and requested the SEC exempt all fixed income securities from its requirements.