Order Granting Broker-Dealers Exemptive Relief, Pursuant to Section 36(a) and Rule 15c2-11(g) under the Securities Exchange Act of 1934, from Rule 15c2-11 for Fixed-Income Securities Sold in Compliance with the Safe Harbor of Rule 144A under the Securities Act of 1933

The U.S. Securities and Exchange Commission (SEC) has published a new order to provide relief to broker-dealers under Rule 17 CFR Part 240, § 240.15c2-11 of the Securities Exchange Act of 1934 when dealing with so-called „Rule 144A“ fixed-income securities, thereby recognizing the unique characteristics of these securities and the specific investor base they cater to.
Specifically, 17 CFR Part 240, § 240.15c2-11 of the Securities Exchange Act of 1934 requires that – before a broker-dealer publishes or submits a quotation for a security in the OTC market – it is required to have certain key, basic information about the security and its issuer. This information needs to be current and publicly available. Also, a broker-dealer must regularly review this information and have a reasonable basis to believe it is accurate in all material respects and sourced from a reliable source.
The SEC is now granting an exemption from these requirements for fixed-income securities sold in compliance with Rule 144A under the Securities Act of 1933 relating to „private resales of securities to institutions“ (17 CFR Part 230, § 230.144A). The reasoning behind this exemption is tied to the nature of Rule 144A fixed-income securities, which are sold to sophisticated investors only with substantial experience in the market and access to basic financial information about the issuer. The SEC believes that the information required pursuant to Rule 144A is sufficient for the purposes of investor protection, even though it differs from the publicly available information required by Rule 15c2-11.
The SEC order specifies that this exemption is limited to Rule 144A fixed-income securities only. It also reminds of the responsibility of parties relying on this exemption to comply with anti-fraud and anti-manipulation provisions of the securities laws.