July 21, 2022

The Honorable Gary Gensler
Chair
U.S. Securities and Exchange Commission
100 F Street N.E.
Washington, DC 20549

Dear Chair Gensler,

SIFMA appreciates the Webex meeting we had with your staff on June 28, 2022 and the smaller, follow-up Webex meeting on June 30, 2022 with your staff to discuss our concerns with the December 16, 2021 Trading and Markets staff No-Action Letter that implements a phased approach to compliance with Rule 15c2-11 of the Securities Exchange Act of 1934 (“Exchange Act”) in fixed income markets, including debt securities resold pursuant to Rule 144A of the Securities Act of 1933.

SIFMA discussed with your staff the serious concerns raised by the application of Rule 15c2-11 to Rule 144A securities issued by private companies and various types of asset-backed issuers, in particular the requirement that issuer financial information be made “publicly available” starting next year under phases two and three of the No-Action Letter in order for broker-dealers to be able to publish or submit quotations for those securities in a quotation medium. As we noted, the value and liquidity of 144A securities (including securities that are already outstanding) are likely to be adversely affected, potentially significantly, without further action by the Commission.

SIFMA’s concerns are shared by a wide spectrum of issuers1 and other bond market participants, and we highlight a letter from The Credit Roundtable to the SEC Chair and staff dated June 21, 2022.2 The Credit Roundtable is a group of large institutional fixed income managers with more than $4 trillion of investment assets – i.e., it represents a very large percentage of buyers of Rule 144A securities as only qualified institutional buyers can purchase these securities. The Credit Roundtable stated in that letter that its “members do not have any issues obtaining access to financial reporting to make informed investment decisions regarding issuers accessing fixed income financing pursuant to Rule 144A and are unaware of significant examples of investors having been harmed by a lack of information access.”

The investors’ satisfaction with current financial reporting reflects the robust information that investors receive in Rule 144A offerings of debt securities and continue to receive while such debt securities are outstanding. The financial reporting covenants that are found in Rule 144A securities have developed through negotiation between issuers and investors over the 30+ years since the adoption of Rule 144A, are typically calibrated to the asset class, and reflect what the investor community considers to be important to their ongoing credit analysis. While it may be obvious, it is important to remember that if investors were not receiving the information they viewed as material, they would not purchase the securities either in their initial offering or in the secondary market.

 

1 See Letter from the National Association of Manufacturers dated July 18, 2022, representing 144A issuers
(https://documents.nam.org/tax/nam_144a_letter.pdf) .
2 See (https://cdn.ymaws.com/thecreditroundtable.org/resource/resmgr/recent_news/220621_crt_letter_re_15c2
11.pdf).