SEC Extends Rule 15c2-11 No-Action Relief Indefinitely for Fixed-Income Securities

Approximately six weeks before the previously granted relief was about to expire, the staff of the U.S. Securities and Exchange Commission (the “SEC”) has granted no-action relief, with no expiration date, from Rule 15c2-11 under the Securities Exchange Act of 1934 (the “Exchange Act”), for fixed-income securities not offered and sold pursuant to Rule 144A (“Rule 144A”) under the Securities Act of 1933 (the “Securities Act”). Without the new relief, broker-dealers may have had difficulties complying with the Rule 15c2-11 information and recordkeeping requirements for these securities. The SEC has already provided separate exemptive relief from Rule 15c2-11 for fixed-income securities offered and sold under Rule 144A.

Generally, the new no-action relief should only have the effect of extending current practice indefinitely, and no additional measures on the part of market participants should be necessary to adapt to last week’s relief.

Rule 15c2-11 governs the publication or quotation of securities in a medium other than a national securities exchange. In 2020, the SEC amended the rule, and in subsequent guidance, the SEC staff asserted its position that Rule 15c2-11 applies to fixed-income securities, against which the rule had historically not been enforced. This view was contrary to the securities industry’s understanding and practice, and imposed burdensome obligations on secondary trading in fixed-income securities by requiring broker-dealers to determine that certain information about the issuer was current and publicly available, and that they had a reasonable basis for believing that the information was accurate and reliable. 

Over the last few years, the SEC staff has issued several different versions of relief from the Rule 15c2-11 requirements, including a November 2022 no-action letter (expiring on January 4, 2025) covering fixed-income securities and October 2023 exemptive relief (with no expiration date) covering fixed-income securities offered and sold pursuant to Rule 144A.

Like the November 2022 no-action letter, the new no-action relief states that the Division of Trading and Markets will not recommend enforcement action to the SEC under amended Rule 15c2-11 for broker-dealers that publish or submit quotations, including continuous quotations, in a quotation medium, for fixed income securities if the broker-dealer publishing or submitting the quotation for the fixed-income security reasonably has determined that the fixed-income security or its issuer meets one of the following criteria:

• The issuer of the fixed-income security also has a class of securities that is listed on a U.S. national securities exchange; 
• The issuer is subject to Exchange Act reporting and has filed all required reports during the preceding 12 months (or for such shorter period that the issuer was required to file such reports); 
• The issuer of the fixed-income security has a class of equity securities that is exempt from registration pursuant to Rule 12g3-2(b) under the Exchange Act (i.e., it is a foreign private issuer that maintains a listing of equity securities in its primary trading market outside the United States and makes its local disclosure documents available electronically to the public in English);
• The fixed-income security is issued by an issuer where a qualified interdealer quotation system makes a publicly available determination (in accordance with the requirements in Rule 15c2-11(a)(3)) that there is current and publicly available information about the issuer for any class of security of the issuer that is eligible for an exception in paragraphs (f)(2)(iii)(B), (f)(3)(ii)(A), or (f)(7) of Rule 15c2-11; 
• There is current and publicly available information (consistent with Rule 15c2-11(b)¹) about the issuer of the subject security;
• The issuer of the fixed-income security is a bank as defined in Section 3(a)(6) of the Exchange Act, a bank holding company, or a credit union regulated by the National Credit Union Association (“NCUA”) that reports information to the Federal Financial Institutions Examination Council or files call reports with the NCUA; or 
• The issuer of the subject security is an asset-backed issuer covered by the 2011 no-action position from the SEC’s Division of Corporation Finance regarding its reporting requirements in respect of its outstanding asset-backed securities. 

The no-action position also applies to any fixed-income security that the broker-dealer reasonably has determined is foreign sovereign debt or a debt security guaranteed by a foreign government.

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We will continue to monitor developments in this area and welcome any queries you may have.

¹ As in its earlier no-action letters, footnote 4 of the November 2024 letter states that the public availability of the information required by Rule 144A(d)(4) would be “consistent with Rule 15c2-11(b).” The letter further adds that the no-action position covers the fixed income securities of a wholly owned subsidiary of a company (1) for which the applicable Rule 15c2-11(b) information is current and publicly available and (2) whose guarantee of such securities of the wholly owned subsidiary is full and unconditional.