The Securities and Exchange Commission announced the relief in a letter posted Friday on its website. The SEC regulation, which takes effect next week, is intended to rid over-the-counter stock markets of companies that are delinquent in disclosing financial information. It does so by barring brokers from publishing quotations for such companies, which are often targets of pump-and-dump schemes and other misconduct.
The SEC didn’t exempt debt from the regulation, triggering anxieties in recent months among traders that dealers would stop quoting some bonds. The Securities Industry and Financial Markets Association and the Bond Dealers of America sent a joint letter to the SEC in August complaining that the new requirement could have a “significant, deleterious effect on fixed-income securities.”
The SEC provided the industry a so-called no-action letter, which means the regulator won’t punish bond dealers for violating the regulation. The relief lapses on Jan. 3, the SEC said. In a Friday statement, Sifma signaled the SEC’s decision fell short of what’s needed.
“While we appreciate the relief, we continue to believe that for the rule to be applied to fixed-income securities it should be amended to reflect the differences between fixed-income markets and OTC equity markets,” Sifma President Ken Bentsen said. “We believe that process will take additional time.”
