Last week, the SEC closed the loop on a proposal from last year and adopted amendments to Rule 15c2-11 to modernize the type of information that needs to be available for broker-dealers to quote securities on the OTC markets. In keeping with the SEC’s current focus on outdated rules, this one was last amended about 30 years ago. Here’s an excerpt from the SEC’s fact sheet about the amendments (and here are statements from SEC Chair Jay Clayton & Commissioner Hester Peirce):
The amendments facilitate transparency of OTC issuer information by:
– Requiring to be current and publicly available certain specified documents and information regarding OTC issuers that a broker-dealer or qualified IDQS must obtain and review for the broker-dealer to commence a quoted market in an OTC issuer’s security (“information review requirement”);
The amendments provide greater investor protections when broker-dealers rely on the piggyback exception by:
– Providing a time-limited window of 18 months during which broker-dealers may quote the securities of “shell companies.”
The amendments reduce unnecessary burdens on broker-dealers by:
– Allowing broker-dealers to initiate a quoted market for a security if a qualified IDQS complies with the information review requirement and makes a publicly available determination of such compliance; and
– Providing new exceptions, without undermining the Rule’s important investor protections, for broker-dealers to:
– Quote actively traded securities of well-capitalized issuers;
– Quote securities issued in an underwritten offering if the broker-dealer is named as an underwriter in the registration statement or offering statement for the underwritten offering, and the broker-dealer that is the named underwriter quotes the security; and
– Rely on certain third-party publicly available determinations that the requirements of certain exceptions are met.
The rule will have a general compliance date that is nine months after the effective date — and a compliance date that is two years after the effective date for the provisions that require a company’s financial info for the last two fiscal years to be current and publicly available.
-Liz Dunshee, TheCorporateCounsel.net September 23, 2020
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