June 10, 2022

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

Dear Chair Gensler,

SIFMA1 appreciated the opportunity to meet with staff from the Divisions of Corporation Finance and Trading and Markets on May 24, 2022 to discuss our concerns relating to the December 16, 2021 Trading and Markets staff No-Action letter. That letter established a detailed, three-phase regime for compliance with Exchange Act Rule 15c2-11 as applied to certain fixed income securities, including debt securities resold pursuant to Rule 144A of the Securities Act. We write to reiterate our concerns, which are echoed by issuers and buyside market participants, regarding application of Rule 15c2-11 to Rule 144A securities issued by private companies and asset-backed issuers, including the condition in the No-Action letter that provides that, following expiration of “Phase 1” of relief in January 2023, 144A issuer financial information must be current and publicly available in order for broker-dealers to be able to publish quotations on such securities on quotation mediums under Rule 15c2-11. The SEC staff has not, despite our requests, shared any policy rationale to support this public disclosure condition. Unless the SEC removes this condition from the No-Action letter or indefinitely extends the relief provided by the No-Action letter, in January 2023, there are likely to be material disruptions to this very important asset class that will harm investors and issuers, with no appreciable benefits accruing to either group.

The currently applicable No-Action relief for Rule 144A debt securities pursuant to “Phase 1” of the staff’s No-Action letter, under which issuer financial information is made available upon request, provides a reasonable approach to address this issue and should be extended indefinitely. Such an approach would be consistent with the requirement of Rule 144A that has been in existence since the Rule was adopted that this financial information be made available upon request to qualified institutional buyers (QIBs), who are the only type of investors permitted to buy 144A securities. It also would avoid the market dislocation that will ensue if Phase 1 of the No-Action relief were to expire. If the SEC believes fundamental changes to Rule 144A are needed to ensure that the public has access to 144A issuer financial information, proposed changes to Rule 144A should be put forth transparently and directly in a formal rulemaking, with an opportunity for investors and other market participants, including Rule 144A issuers, to comment. By doing this, the SEC would be able to ascertain and consider the important views of investors, issuers, other market participants, and would be able to address uncertainties and questions regarding the specific application of any changes to Rule 144A. Rule 15c2-11 should not be used as an indirect way to change Rule 144A’s information requirements or inhibit issuers’ reliance on Rule 144A’s 30-year history of allowing them to raise funds privately.

 

1 SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s one million employees, we advocate on legislation, regulation and business policy affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA).