On September 16, 2020, the Securities and Exchange Commission ("SEC") published a final rule ("Final Rule") amending SEC Rule 15c2-11, which imposes information review requirements before a broker-dealer may publish or submit a quotation for an over-the-counter ("OTC") security.

In particular, the Final Rule emphasizes that an issuer's information be current and publicly available, extends the information review requirements to, and permits reliance upon, qualified interdealer quotation systems ("IDQSs"), limits the availability of certain existing exceptions to the information review requirements, including the "piggyback" exception, and adds additional exceptions for certain securities that are less susceptible to fraud, such as highly liquid securities of wellcapitalized issuers. The Final Rule's adopting release also updates existing SEC guidance regarding how a broker-dealer evaluates the reliability of information provided by an issuer and whether the information is accurate, including updating relevant "red flags" that may necessitate additional scrutiny, but reinforces that a broker-dealer is not generally required to undertake an independent review of an issuer similar to an underwriter in order to fulfill its obligations under the Final Rule.


Rule 15c2-11, in both its current and amended form, is a prophylactic anti-manipulation rule that restricts the circumstances in which a broker-dealer may publish a quotation for an OTC security. The rule requires broker-dealers to review certain information about an issuer of an OTC security, and have a reasonable basis for believing such information is materially accurate and reliable, before publishing a quotation for that security in a quotation medium, thus limiting the widespread availability of quotations for securities of issuers for which there is little reliable publicly available information. The information a brokerdealer must review to fulfill this obligation depends on the type of issuer. For issuers with disclosure and reporting obligations under federal securities laws, the broker-dealer can generally fulfill its obligations by reviewing the required disclosure documents. For issuers that do not have such disclosure obligations (a "catch-all issuer"), Rule 15c2-11 sets forth a list of information a broker-dealer must collect and review, including basic information about the issuer's business and the issuer's recent financial statements.

Current Rule 15c2-11 also includes certain exceptions to these obligations, including for (i) securities that trade on a national securities exchange, (ii) unsolicited customer orders, (iii) municipal securities, and (iv) the piggyback exception. The piggyback exception permits broker-dealers to submit quotations without information review responsibility where the underlying security has been the subject of quotations on an IDQS for each of at least 12 days within the previous 30 calendar days, with no more than four business days in between a quotation.

Primary Changes from the Existing Rule

The amendments to Rule 15c2-11 generally expand the scope of the rule to encompass additional market participants, place greater emphasis on information about OTC issuers being both current and publicly available, add exceptions for more liquid and highly capitalized issuers and underwritten offerings, and revise the piggyback exception to limit its use in the case of shell companies and delinquent or other issuers that do not make current information publicly available. These changes are discussed more fully below.

  • Qualified interdealer quotation systems. The information review requirements of Rule 15c2-11 have been expanded to apply to Qualified IDQSs1 (together with broker-dealers, the "Covered Entities"). A Qualified IDQS must satisfy these requirements before making known to others the quotation of a broker-dealer that is published or submitted for publication. In addition to reviewing the information for accuracy and reliability, the Qualified IDQS must also make a "publicly available determination" that it has fulfilled its information review obligations.
    • In a significant change from current Rule 15c2-11, a broker-dealer is permitted to rely upon a Qualified IDQS to satisfy the information review requirements so long as the broker-dealer publishes its quotation within three days of the Qualified IDQS making a publicly available determination.
  • Types of issuer information. Aside from adding (i) requirements to review information on the identity of company officers and shareholders that own 10% or more of the issuer's equity for catchall issuers and (ii) a provision tailored to the specific regulatory status and existing disclosure and reporting obligations of a Regulation Crowdfunding issuer, the Final Rule leaves the types of documents and information a Covered Entity must review to fulfill its obligations relatively unchanged (such documents and information, "paragraph (b) information").
  • Emphasis on "current" and "publicly available" information. The Final Rule adopts several amendments that generally require information relied upon by a Covered Entity to be current and publicly available for all types of issuers. These requirements apply to the publication of quotations founded upon review of paragraph (b) information or reliance upon the piggyback exception, subject in the latter case to certain allowance periods for delinquent issuers.


1 An "interdealer quotation system" is defined as any system of general circulation to brokers or dealers that regularly disseminates quotations of identified broker-dealers. A "qualified interdealer quotation system" is defined as any interdealer quotation system operating as an alternative trading system under Regulation ATS 17 C.F.R. § 242.300(a) and is not an "exchange" per the exemptions at 17 C.F.R. § § 240.3a1-1(a)(2).

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