On July 29, 2022, the U.S. Securities and Exchange Commission (SEC) unanimously proposed amendments to Rule 15b9-1 (the Proposal) under the Securities Exchange Act of 1934 (Exchange Act) that, if adopted, would substantially narrow an exemption for broker-dealers from the requirement to become a member of the Financial Industry Regulatory Authority (FINRA).1 The Proposal is designed to require broker-dealers that engage in securities transactions over the counter (OTC) to be subject to oversight by FINRA, the primary regulator of the OTC markets for securities.2
The Proposal closely relates to the SEC’s separate proposal in late March 2022 to significantly expand the scope of firms that must register as dealers (the Dealer-Trader Proposal).3 If the both the Proposal and the Dealer-Trader Proposal are adopted, then most of the estimated 97 firms that would be required to register as dealers with the SEC would also be required to become FINRA members. As we noted in our Dealer-Trader Proposal client alert, proposed amendments to Rule 15b9-1 appeared likely in order to ensure that FINRA would be able to supervise the OTC trading of such firms — particularly with respect to transactions in U.S. Treasury securities that all occur OTC.4
The Proposal’s comment deadline is the later of (i) Tuesday, September 27, 2022 (60 days after issuance of the Proposal), or (ii) 30 days after publication of the Proposal in the Federal Register.
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