Washington, D.C. — MFA supported the Securities and Exchange Commission’s (SEC) proposal to clarify that Rule 15c2-11 applies only to over-the counter (OTC) equity securities, not fixed income markets, in a comment letter submitted today. The rule requires broker-dealers to verify certain issuer information before publishing quotations and has historically applied to OTC equity markets. The SEC proposal would ensure the rule cannot be extended beyond its intended purpose without adequate cost-benefit analysis or public comment—an initiative attempted under the prior administration.
“The SEC’s proposal is a common-sense measure that keeps the OTC quoting rule focused on equity markets,” said Jennifer Han, MFA Chief Legal Officer. “Fixed income markets operate differently from equity markets, and applying this framework to bonds would reduce liquidity, weaken price transparency, and increase costs for investors. The proposal will preserve deep, efficient fixed income markets that enable investors to deploy capital to businesses that need funds to hire and grow.”
MFA explained that the rule was originally designed to address fraud in retail OTC equity markets, especially microcap “penny stock” schemes. Fixed income markets are fundamentally different. Many bonds trade bilaterally through dealers and do not have the type of continuous public issuer disclosure required by the rule. Applying the rule to fixed income markets would create compliance uncertainty and discourage dealers from providing quotations, reducing liquidity and, in some cases, preventing trading.
Read the full letter here.
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The global alternative asset management industry — including hedge funds, private credit funds, and hybrid funds — serves thousands of public and private pension funds, charitable endowments, foundations, and other global institutional investors. The industry provides portfolio diversification and risk-adjusted returns to help meet their funding obligations and return targets throughout the economic cycle.
About MFA
Managed Funds Association (MFA), based in Washington, D.C., New York City, Brussels, and London, represents the global alternative asset management industry. MFA’s mission is to advance the ability of alternative asset managers to raise capital, invest it, and generate returns for their beneficiaries. MFA advocates on behalf of its membership and convenes stakeholders to address global regulatory, operational, and business issues. MFA has more than 180 fund manager members, including traditional hedge funds, private credit funds, and hybrid funds, that employ a diverse set of investment strategies. Member firms help pension plans, university endowments, charitable foundations, and other institutional investors diversify their investments, manage risk, and generate attractive returns throughout the economic cycle.
