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ASA Statement on SEC Exempting Rule 144A Fixed-Income Securities from Rule 15c2-11



WASHINGTON, D.C. – Today, the U.S. Securities and Exchange Commission (SEC) issued an order granting broker-dealers exemptive relief from Rule 15c2-11 for fixed-income securities sold in compliance with the safe harbor of Rule 144A under the Securities Act of 1933. ASA President and CEO Chris Iacovella issued the following statement on the SEC’s order granting broker-dealers exemptive relief from Rule 15c2-11 for fixed-income securities:


“We thank the SEC for listening to reason and realizing that applying this rule to fixed income securities was misguided from the start,” said ASA President & CEO Chris Iacovella. “Simply asking a question in a rule proposal does not mean the public had adequate notice to understand what the agency was thinking. This overdue exemption is a ‘logical outgrowth’ of the agency’s own error.”

In April 2023, ASA sent a letter to the House Financial Services Committee Subcommittee on Capital Markets outlining insight and concerns on legislation to except quotations of Rule 144A fixed-income securities from certain regulatory requirements. In the letter, we wrote, “ASA supports exempting 144A fixed income securities from Rule 15c2-11 because it would mitigate some of the negative consequences from the misapplication of Rule 15c2-11 while protecting investors in the fixed income markets.”

In July 2022, the ASA applauded numerous bipartisan members of the House Financial Services Committee for sending a letter to the SEC regarding an announcement concerning Rule 15c2-11 and implications for Rule 144A debt offerings, writing, “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.”

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 regarding amendments to Rule 15c2-11, stating that 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.

Background:

The SEC adopted Rule 15c2-11 under the Securities Exchange Act of 1934 (Exchange Act) in 1971.

In September 2020, the Commission adopted amendments to Rule 15c2-11 to require brokers or dealers to have in their records specified information about the issuer and its security that is current and publicly available before a broker-dealer can begin quoting that security.

Following the Commission’s 2020 adoption of amendments to Rule 15c2-11, the ASA and other market participants stated that Rule 15c2-11’s information review and recordkeeping requirements should not apply with regard to quotations for fixed-income securities that are sold in compliance with the safe harbor in “Rule 144A” under the Securities Act.

Further, on November 22, 2022, the National Association of Manufacturers (NAM) and the Kentucky Association of Manufacturers (KAM) submitted a petition to the Commission for a rulemaking to amend Rule 15c2-11, to expressly exempt from Rule 15c2-11 Rule 144A fixed-income securities (Petition).

Read the SEC’s order here.


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About the American Securities Association


American Securities Association, based in Washington, DC, represents the retail and institutional capital markets interests of regional financial services firms who provide Main Street businesses with access to capital and advise hardworking Americans how to create and preserve wealth. ASA’s mission is to promote trust and confidence among investors, facilitate capital formation, and support efficient and competitively balanced capital markets. This mission advances financial independence, stimulates job creation, and increases prosperity. The ASA has a geographically diverse membership of almost one hundred members that spans the Heartland, Southwest, Southeast, Atlantic, and Pacific Northwest regions of the United States.

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