SEC Proposes to Limit Rule 15c2-11 to Equity Securities
On March 16, 2026, in Release 34-105004 (Release), the Securities and Exchange Commission (SEC) proposed to amend Rule 15c2-11 under the Securities Exchange Act of 1934 (Rule 15c2-11) to limit its application to equity securities only. The proposed rule would resolve the uncertainty and ambiguity concerning the Rule's application to broker-dealer quotations for fixed income securities that resulted from the SEC's statements and actions since the Rule was adopted in 1971. As the Release notes, when the SEC adopted significant amendments to the Rule in 2020, various industry participants "stated that they never understood Rule 15c2-11 to apply to non-equity securities."[1]
Rule 15c2-11 requires a broker-dealer proposing to publish a quotation for a security in a quotation medium to gather and review specified information about the security and its issuer, unless an exception or exemption is available. Despite the Rule's clear focus on equity securities traded in the over-the-counter (OTC) markets by retail investors, and the SEC's past acknowledgement that the Rule is not well-suited to debt securities, the SEC has never excluded fixed income securities from its coverage. Until now.
The principal proposed amendment would limit the Rule's scope to publication of a quotation in a quotation medium by a broker-dealer for an "equity security" as that term is defined in Rule 3a11-1 under the Exchange Act. Although that seems to be straightforward, the Release raises some ambiguities of its own and poses a variety of questions.
Definition of "equity security": The Rule would apply to the publication of any quotation for an "equity security" as defined definition in Rule 3a11-1. Although the same term is defined in Section 3(a)(11) of the Exchange Act, the SEC proposes to use the more expansive definition: "Leveraging the definition in Rule 3a11-1 should provide more clarity with respect to which securities are subject to the rule than referencing the statutory definition."
The SEC also comments that: "In addition, Rule 3a11-1 provides a definition that should be familiar to issuers who are tracking their obligations under Exchange Act section 12(g)." Rule 3a11-1 defines the term "as used in Sections 12(g) and 16" of the Exchange Act. That fact and the SEC's statement implies that the Rule is limited to equity securities of Section 12(g) issuers. However, that would be a misreading of the proposed rule because it is clear that the SEC intends the Rule to continue covering quotations for all equity securities quoted in the OTC markets.[2] Question 3 in the Release asks whether a definition of "equity security" should be added to paragraph (e) of the Rule. Doing that would avoid this potential ambiguity about the Rule's scope.
Question 18 in the Release recognizes that the determination of whether a security is an "equity security" may not be straightforward and may involve costs. Question 17 turns the SEC's past questions about the coverage of the Rule on its head: "Are there specific types of non-equity OTC securities that should be included within the scope of Rule 15c2-11? What is the aggregate market value of these other non-equity OTC securities, and are their investors retail or institutional?"
Application to convertible debt securities: The definition of "equity security" in Rule 3a11-1 includes "any securities convertible, with or without consideration into" an equity security. Therefore, the Rule would continue to apply to such debt securities. When the SEC has considered excluding debt from the Rule in the past, it generally has proposed to limit the scope of the exclusion to non-convertible debt.[3] As noted above, recent SEC actions concerning the application of the Rule to non-equity securities has focused on "fixed income" securities.[4] Although convertible debt securities may have fixed income features, the current proposal does not address whether the Rule should continue to apply to some or all of such debt.
Application to crypto securities: The Release notes that the Rule applies to quotations for crypto assets that are equity securities. Question 9 asks whether crypto equity securities should be excepted from the Rule and, if so, why. Question 10 implicitly recognizes that the current information gathering requirements in the Rule are not well adapted to crypto securities and asks whether the requirements should be tailored to address such securities. The application of the Rule to crypto securities opens a wellspring of issues, for example: is the security an "equity security"?; in the context of crypto markets, what is a "quotation"?; and what is a "quotation medium" in that context?[5]
Application to municipal securities: Since 1976, the Rule has contained an exception in paragraph (f)(4) for quotations for municipal securities. Because the Rule is proposed to apply only to equity securities, the SEC proposes to delete this exception because it is "expected to no longer be needed."[6]
Application to exchange-traded securities: The SEC states that the Rule contains an exception for securities "listed on national securities exchanges." That is imprecise: exception (f)(1) applies to securities "admitted to trading on a national securities exchange," which is a wider group of securities. Although fixed income securities are intended to be excluded from the Rule if the amendments are adopted, this exception may still have vitality for some debt securities. As noted above, a debt security that is convertible into equity is included in the Rule 3a11-1 definition of "equity security." The Rule would continue to apply to such debt, but the (f)(1) exception may be available if the debt is admitted to trading on a national securities exchange and meets the requirements of the exception.[7]
Application to Rule 144A transactions: It has not always been clear whether the SEC or securities industry participants were considering straight fixed income securities or debt securities more generally in the context of Rule 15c2-11. As the Release notes, in response to a Petition, in 2023 the SEC granted exemptive relief for quotations for "fixed income securities" sold in compliance with Rule 144A under the Securities Act of 1933. The exemption noted that, consistent with the scope of the request for the exemption, the relief did not extend to equity securities sold in compliance with Rule 144A. The SEC explained: "Because the exemption applies only to fixed-income securities issued in accordance with the requirements of Rule 144A, it is limited to resales of securities to an investor base that 'can be conclusively assumed to be sophisticated,' is able to obtain certain basic financial information concerning the issuers' business, and has extensive experience in the private resale market for restricted securities."
This exemption defined "fixed income security" as "any note, bond, debenture, certificate of deposit for a security, certificate of deposit, or asset-backed security." Although the exemption and the Petition distinguished "equity securities" from "fixed income securities," they did not address the status of convertible debt as "equity." The Petition's discussion of the need for an exemption, however, shows that it was using "equity" in relation to the Rule to describe classic equity securities sold OTC to retail investors. The lack of a definition along with the stated rationale for the exemption leaves open the question of whether the Petition and the exemption were intended to cover convertible debt sold in Rule 144A transactions and, therefore, whether the exemption will continue to have vitality if the proposed amendments are adopted.
"Expert markets": The Release notes that in 2020 the SEC proposed (but did not adopt) a limited exemption from the Rule for certain quotations displayed on "expert markets," i.e., one where the distribution of such quotations is restricted to sophisticated or professional investors.[8] Questions 11, 12, and 13 in the Release ask: whether the 2020 exemption should be re-proposed; whether a new exception should be added to the Rule that would "facilitate the formation" of expert markets; and "what effect would the formation of an expert market have on the liquidity of the securities of non-reporting companies that choose not to make their paragraph (b) information publicly available?"
Definitional clarifications: Question 8 in the Release asks whether the word "equity" should be added to the definitions of "quotation" and "quotation medium" in paragraphs (e)(7) and (8) of the Rule. Replacing "a security" with "an equity security" in the definition of "quotation" may be unnecessary but it would be consistent with proposed insertions of "equity" in other parts of the Rule and would show that only quotations for equity securities are subject to the Rule. The "quotation medium" context may be different. For example, replacing "any security" with "any equity security" might suggest that only facilities that display quotations solely for equity securities are covered by the Rule. However, it seems likely that the SEC would want the Rule to apply to publication of a quotation for an equity security on any facility that permits display of the interest of multiple broker-dealers in transactions in an equity security.[9]
General antifraud provisions: Although fixed income securities would not be covered by the Rule if the proposed rule were adopted, the SEC notes that quotations for non-equity securities would remain subject to antifraud provisions in the securities laws.
Rule amendment implementation: The SEC is proposing "simultaneous compliance and effective dates for the amendments (proposed to be 60 days after publication of the proposed amendments in the Federal Register)." The SEC explains: "This approach would limit the amount of time before the applicability of Rule 15c2-11's proposed revision to refer to only equity securities, as defined in Rule 3a11-1." However, effectiveness of a rule requires adoption by the SEC. Because the proposed rule was published in the Federal Register on March 19, 2026, the comment period for the proposed rule is also 60 days after Federal Register publication, so the comment period expires and effectiveness will both occur on May 18, 2026.
In light of the foregoing, it is difficult to see how the amendments could be adopted and implemented on the same day that the comment period ends, and the SEC even asks about that problem in Question 15: "Would having simultaneous compliance and effective dates for the amendments … present any operational difficulties or other challenges?" If the SEC determined that rapid adoption of the amendments would be in the public interest and for the protection of investors, it could have adopted an "interim final rule" or "interim final temporary rule." Such a rule would become effective upon publication and could be made permanent or modified after comments were received.[10]
Conclusion
The SEC's proposal will settle the contentious question of whether the Rule does or should apply to fixed income securities. As discussed above, there remain a number of details to be resolved. Commenters should submit their suggested changes expeditiously to account for the truncated timeline addressed above.
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Larry Bergmann and Russell Fecteau are of counsel in the financial services group in the Washington, D.C. office of DWT. For more insights, reach out to Larry, Russell, or another member of our financial services team or sign up for our alerts.
[1] Even at least one SEC Commissioner was somewhat caught off-guard. Commissioner Peirce, "Statement on Staff No-Action Letter Regarding Amended Rule 15c2-11 in Relation to Fixed Income Securities" (Sept. 24, 2021).
[2] Moreover, not all equity securities are required to be registered under Section 12(g). See, e.g., Exchange Act Rules 12g-1 and 12g3-2.
[3] See, e.g., Release 34-41110 (Feb. 25, 1999), 64 FR 11124, 11127, 99-5299.pdf. However, the proposal also would have excluded convertible securities where the underlying equity satisfied a specified average daily trading volume threshold. Id.
[4] See, e.g., Release 34-98819 (Oct. 30, 2023), 88 FR 75343, 2023-24245.pdf; SEC, Division of Trading and Markets, No-action Letter "Re: Amended Rule 15c2-11 in relation to Fixed Income Securities" (Sept. 24, 2001), rule-15c2-11-fixed-income-securities-092421.pdf.
[5] See Rule 15c2-11(e)(7) and (8). See also, SEC Issues Interpretation Applying Federal Securities Laws to Crypto Assets (Mar.18, 2026). That interpretation gives the SEC's (and the Commodity Futures Trading Commission's) latest and specific views on: (a) the regulatory status of the number of specific crypto tokens, (b) a detailed "crypto taxonomy" that provides crypto market participants with the most detailed guidance to date on whether they fall inside or outside of the Commission's regulatory perimeter, and (c) how various activities such as staking and airdrops should be analyzed under the "investment contract" component of the "Howey test."
[6] 91 FR at 13248. But see Question 6, id. The Rule has never applied to "exempted securities" such as government securities including treasuries. See SEC, Division of Trading and Markets, "Amended Rule 15c2-11 in relation to Fixed Income Securities" (Sept. 24, 2021), n.2, rule-15c2-11-fixed-income-securities-092421.pdf.
[7] See, A Significant Development for Broker-Dealers Quoting Fixed Income Securities (Mar. 6, 2025), discussing an exemption issued to the New York Stock Exchange by the SEC that allows for fixed income securities traded, but not listed, on NYSE Bonds, an electronic order-driven matching system for fixed income securities, subject to certain conditions.
[8] See Release 34-90769 (Dec. 22, 2020), 86 FR 2311, 2020-28700.pdf. The exemption would have applied to certain securities that become ineligible for quotation, i.e., would "go dark," after the adoption of the 2020 amendments to the Rule because the information required by the Rule is not current and publicly available for the issuers of those securities.
[9] The Rule does not impose any obligations on quotation mediums as such. Only quotation mediums that are "qualified interdealer quotation systems" that choose to perform the functions described in Rule 15c2-11(a)(2) become subject to specific requirements.
[10] See, e.g., Release 34-58773 (Oct. 14, 2008), 73 FR 61706, E8-24785.pdf.