U.S. SEC Clarifies Rule 15c2‑11 Applies Only to Equity Securities

• U.S.SEC clarified that Rule 15c2‑11 applies only to equities, not to other asset classes.
• The latest clarification boosts the OTC market and ensures brokers properly review information before trading.

The U.S. Securities and Exchange Commission proposes modifications to revise Exchange Act Rule 15c2-11, stating that the rule only applies to equity securities, as this move provides guidance for over-the-counter (OTC) trading, potentially ending the question of whether the rules apply to other asset classes like crypto-linked products.

According to the official statement on March 16,  the main focus of Rule 15c2-11 is on preventing certain manipulative and fraudulent trading schemes in the OTC equity markets. From now on, it would refer to only equity securities and sets out certain compliance requirements, where broker-dealers must gather and check key details before quoting or maintaining a market for securities in the OTC market.

Hester Peirce Supports Rule Clarification

Further,  Commissioner Hester M. Peirce said she supports the SEC’s proposal to amend Rule. With that, Peirce noted that the 2020 amendments have raised questions regarding the applicability of the rule and argued that the Commission provided temporary guidance and relief for fixed-income securities. 

She acknowledged that her own role in not clarifying the rule’s scope earlier, “ I continue to blame myself for failing to ensure that we made the scope of the rule’s application crystal clear during the adoption of amendments to Rule 15c2-11.”

Also, she encourages public comments on proposed revisions to Rule 15c2-11, as the comment period will remain open for 60 days, aiming to clarify its scope for distinct markets. She is particularly interested in how equity security should be defined, how the rule should apply to crypto assets, and what actions should be taken to establish expert markets.

Crypto Clarity and Regulatory Guidance

From these changes, it is clear that the rule applies only to equities, not to other asset classes, because previously, the rule was not clear whether to apply to crypto. With that, some brokers are confused and have stopped trading crypto, considering it a risk from a legal perspective.  

Then, two weeks before, the U.S. SEC submitted a new framework that focused on developing a token taxonomy, a system to categorize cryptocurrencies and to determine which come under securities under U.S.SEC laws and which may be treated differently, aiming to provide clearer guidance for crypto-related businesses.