The SEC adopted amendments to Exchange Act Rule 15c2-11 ("Initiation or Resumption of Quotations without Specific Information") that impose additional conditions on the ability of a broker-dealer to publish a quotation for securities that are not listed on a national securities exchange ("OTC securities"). The amendments were published in the Federal Register.
As previously covered, Rule 15c2-11 had permitted broker-dealers to initiate quotes on OTC securities when (i) there was available specified information as to the issuer that the broker-dealer reviewed, (ii) the broker-dealer could "piggyback" on the fact that other broker-dealers were publishing quotes on the relevant security or (iii) the broker-dealer was quoting on behalf of a customer. Under the adopted amendments, the piggybacking exemption is significantly reduced, and will be eliminated in the case of shell companies. It will not be sufficient for the broker-dealer to have the relevant information; the necessary information will have to be current and "publicly available."
Additionally, the SEC made a variety of definitional and operational changes to Rule 15c2-11, including changes that will reduce the operational requirements for broker-dealers to publish quotations as to foreign private issuers.
The amendments will go into effect on December 28, 2020, but an additional period will be allowed for issuers and broker-dealers to come into compliance with Rule 15c2-11's new requirements.
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