On November 30, 2022, the Securities and Exchange Commission (SEC) issued a revised No-Action Letter (New NAL) in relation to amended Rule 15c2-11 and its application to fixed income securities and the 144A market. The New NAL provides temporary relief to the market ahead of the December 2021 No Action Letter’s January 2023 compliance deadline by pushing off portions of its enforcement of the Rule for two more years.

The latest guidance completely replaces the Dec 2021 NAL and follows SFA’s recommendations and temporarily prevents potential severe liquidity consequences on a large segment of the 144A market.

Specifically, provisions of the new No-Action Letter include:

 

• Consistent with SFA’s advocacy: Removal of the requirement for 144A asset-backed and corporate securities to make required disclosures publicly available in order to be in compliance with Rule 15c2-11. The disclosure requirements under 15c2-11 are now aligned with the current Rule 144A requirements.
• Consistent with SFA’s advocacy: Removal of the requirement for a mandatory hyperlink on the quotation medium on which a security is being quoted.
• Removal of all the other compliance phasing included in 2021 NAL
• Inconsistent with our advocacy, almost all of the relief provided in the New NAL expires on January 4, 2025, including all the relief listed above.

 

SFA commends the SEC’s decision to extend the no-action period. However, expresses concern that the relief is only temporary. Given the extensive use of 144A issuance in structured finance and the publication of quotations for those deals, SFA will continue to work with SEC staff and Capitol Hill for permanent relief, far ahead of the expiry date. SFA members interested in joining the effort, can sign up for the SEC 15c2-11 Task Force by filling out this short form.

Rule Background: Rule 15c2-11 initially targeted at Over-the-Counter (OTC) markets decades ago was amended in 2020 retroactively. After the amended rulemaking process was finalized the market was surprised to learn via the Dec 2021 NAL that the Rule also applied to the fixed income market.  In this Dec 2021 NAL the SEC also established a phased-in compliance regime for the fixed income market and while the burden of compliance with the new information accessibility requirements rested on brokers-dealers, action to achieve compliance stretches to broader segments of market participants. For one, the new requirements were a drastic deviation from historical market disclosure practices found under Rule 144A and could create significant negative liquidity consequences for 144A securities by publicly disclosing investor reports.

Read SFA’s Press Release on the Latest SEC Update: Structured Finance Association Welcomes the SEC 15c2-11 No-Action Relief Avoiding a Looming Deadline for the 144A Market – Structured Finance Association