All submissions must refer to file number SR-FINRA-2021-014. This file number must be included in the subject line when using email. To help the Commission process and consider your comments more effectively, please use a single method. The Commission will publish all its comments on its website (www.sec.gov/rules/sro.shtml). Copies of the submission, any subsequent amendments, all written submissions relating to the proposed rule amendment submitted to the Commission, and any written communication relating to the proposed amendment between the Commission and any person, except those submitted to the public pursuant to the provisions of 5 U.S.C. 552; will be available to view and print the website on official business days between 10 a.m. and 3 p.m. in the Commission`s Public Reference Room, 100 F Street NE, Washington, DC 20549. Copies of this submission will also be available for inspection and reproduction at FINRA headquarters. All comments received will be posted without any changes.
Individuals who submit comments are informed that we do not blacken or change the personal data of comment submissions. You should only submit information that you wish to make publicly available. All submissions must refer to file number SR-FINRA-2021-014 and must be submitted by July 6, 2021. The Securities and Exchange Commission (“SEC”) passed Rule 15c2-11 of the Securities Exchange Act of 1934 (“Exchange Act”) in 2020 with an effective date of April 26, 2020. September 2021 has changed. Rule 15c2-11 applies primarily to broker-dealers who offer quotes for securities traded on the over-the-counter (“OTC”) market. The rule deals with the obligation of broker-dealers to have an appropriate basis for assuming that issuers of securities listed on the OTC market have kept financial and other information up to date and made it public. The amendment included the documents and types of information that must be reviewed before making security offers and stipulated that the information must be publicly available. Following the rule change, some industry representatives who trade fixed income contacted the SEC to request an extension to make the necessary operational and system changes to comply with the rule changes. On the 24th. In September 2021, Ministry of Commerce and Markets staff issued a no-action letter stating that they would not recommend enforcement action under the amendments to Rule 15c2-11 until January 3, 2022.
This would apply to fixed income quotes published by broker-dealers in the registration media.1 SEC staff issued the extension to allow for an orderly transition to compliance with the amended rule. The final version of the rules includes an in-depth discussion of the many comments received (I was one of the many comment writers), especially when it comes to the piggyback exception. As part of the comment process, OTC markets and many of their supporters proposed the creation of a new “expert market” that would allow securities trading with little or no limited information from institutions and other qualified retailers. In rejecting the proposal, the SEC pointed out that there was not enough detail and information on the functioning of such a market, but that it was open to examination of such a separate and qualified market by experts in the future on the basis of the appropriate bases. The phased-in approach allows broker-dealers who publish or submit fixed income offers on a listing medium to meet the requirements of Rule 15c2-11. If the securities of an OTC issuer lose their compliance with rule 15c2-11, they will be removed from the grey market listing. This happens automatically if there are no quotes published for a stock for four consecutive trading sessions. (An additional requirement that inventory be quoted for at least 12 days in the last 30 calendar days has been removed from the final rule.) The grey market, sometimes referred to as the “Penny Stock Cemetery”,” has been extremely illiquid in the past.
Many of its inhabitants eventually ceased their activities altogether and their stock symbols were removed by FINRA. In the end, it was decided to keep the exception, but not in its original form. Deviations from the proposed rule will be very different from letterbox companies and what the SEC calls “catch-all” issuers: roses that are not registered with the SEC and therefore do not need to make any disclosure at all.