SEC Proposes to Narrow Rule 15c2-11 to Equity Securities - Winston & Strawn

SEC Moves to Limit Rule 15c2-11 to Equity Securities

The Securities and Exchange Commission on March 16, 2026, proposed amendments to Exchange Act Rule 15c2-11 that would formally limit the rule’s scope to equity securities. The proposal would align the rule’s text with what market participants had long understood to be its purpose and application, and it could have significant practical implications for broker-dealers, fixed-income issuers, and other capital markets participants.

Rule 15c2-11 was adopted in 1971 to address manipulative and fraudulent trading schemes in over-the-counter equity markets. It requires broker-dealers to gather and review issuer information before publishing quotations for securities in OTC markets, serving as a gatekeeping measure aimed at preventing fraudulent issuers and shell companies from gaining legitimacy through published quotes.

For decades, the rule was generally understood by market participants and regulators to apply only to OTC equity securities, particularly those held by retail investors, such as penny stocks. That understanding changed after the SEC amended the rule in 2020. In a September 2021 no-action letter to FINRA, the SEC said the rule also applied to fixed-income securities, including Rule 144A debt securities, despite the widespread market view that it did not.

Years of Uncertainty

The SEC’s 2021 position triggered a period of regulatory uncertainty. Trade associations and broker-dealers argued that the rule’s requirements and exemptions were designed for equity markets and did not fit the fixed-income market, which includes more than 2.5 million CUSIPs and operates with different trading patterns, investor bases, and information flows.

In response, SEC staff issued a series of temporary no-action letters between 2022 and 2023, some lasting only a few months. In October 2023, the agency eventually granted permanent exemptive relief for Rule 144A fixed-income securities. Even so, uncertainty remained, particularly because market participants worried that the SEC could later modify or revoke that relief.

The proposal now seeks to resolve that uncertainty by revising Rule 15c2-11 to replace the term “security” with “equity security” throughout the rule, using the existing definition in Exchange Act Rule 3a11-1. If adopted, the change would codify the longstanding view that the rule’s information-review requirements apply only to equity securities traded in OTC markets.

Market Impact and Next Steps

The proposal could provide broader clarity for fixed-income markets. While the 2023 exemptive order covered Rule 144A fixed-income securities, it did not extend to debt securities sold under other exemptions such as Regulation S, Section 4(a)(2), or Regulation D. Those instruments have instead relied on staff no-action relief. The proposed amendments would eliminate that distinction by clearly excluding all non-equity securities from the rule’s scope.

For issuers of corporate bonds, asset-backed securities, and other debt instruments, that would offer a more durable solution than temporary or exemptive relief. It would also address longstanding compliance and liquidity concerns in secondary markets for privately placed debt.

Comments on the SEC’s proposal are due by May 18, 2026.