The U.S. Securities and Exchange Commission has proposed narrowing the scope of Rule 15c2-11, a broker-dealer reporting rule that has caused years of uncertainty for over-the-counter (OTC) markets. Adopted in 1971 to curb fraud in the penny stock market, the rule requires broker-dealers to have up-to-date public information about an issuer before publishing OTC quotes.
In 2021 the SEC’s interpretation expanded to include fixed-income securities (such as government and corporate bonds), a move that drew market backlash and questions about whether the rule could apply to crypto assets. On Monday the SEC proposed an amendment that would limit 15c2-11’s reporting requirements to “equity securities,” effectively reversing the 2021 interpretation.
Commissioner Hester Peirce, who leads the agency’s crypto task force, welcomed the proposal. She said the rule’s text refers broadly to a “security,” but market participants historically understood it to apply only to OTC equity securities. Peirce criticized the agency’s handling after 2020, noting that instead of granting long-term no-action relief while reassessing the rule’s application to fixed-income, the SEC issued multiple short-term limited reliefs, creating ongoing uncertainty.
The SEC defines an equity security as any stock, similar security, or convertible security representing an ownership interest in a company. The agency has not yet decided whether that definition could encompass crypto assets and has opened a 60-day public comment period. Peirce expressed particular interest in public views on the definition of “equity security,” the rule’s application to crypto assets, and next steps regarding the potential formation of an “expert market.”
This proposal comes amid broader efforts to clarify crypto regulation in the U.S. The SEC and the Commodity Futures Trading Commission recently signed a memorandum to coordinate oversight of financial markets, including crypto, aiming to reduce longstanding regulatory turf disputes.
