On October 30, 2023, the SEC granted permanent relief from Rule 15c2-11 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) for fixed-income securities traded under Rule 144A under the Securities Act of 1933, as amended. Absent that relief, beginning in early 2025, broker-dealers would have been prohibited from publishing quotations for Rule 144A fixed-income securities if the issuer of those securities did not make certain financial information publicly available.
As discussed in our prior Alert, in September 2020 the SEC amended Rule 15c2-11, which governs when broker-dealers can publish quotations for securities to, among other things, generally prohibit broker-dealers from publishing quotations for an issuer’s securities in a quotation medium when current information about the issuer is not publicly available.
In 2021, the SEC staff clarified that they interpreted Rule 15c2-11 to apply to fixed-income securities as well as equity securities and granted time-limited relief through January 4, 2023 from the public information requirement for fixed-income securities offered pursuant to Rule 144A. The SEC later extended that relief until January 4, 2025.
The SEC’s grant of permanent relief allows issuers of Rule 144A fixed-income securities that are not reporting companies under the Exchange Act, or are exempt from reporting under Rule 12g3-2(b) under the Exchange Act, to continue following long-standing and well-developed disclosure practices, by providing financial information to holders and prospective purchasers of those securities – often through password-protected data rooms – rather than making their financial information publicly available.
The relief granted by the SEC should address significant concerns raised by market participants that the application of Rule 15c2-11 to currently outstanding Rule 144A fixed-income securities would impair the liquidity and pricing of those securities if private company issuers were not willing to make financial information publicly available.
Additionally, absent the relief granted by the SEC, private companies that did not wish to make financial information publicly available may have eschewed issuing fixed-income securities in the Rule 144A market in the future.
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