U.S. Rep. Troy Downing (R-MT) introduced legislation in the House that exempts fixed income securities from Securities and Exchange Commission (SEC) Rule 15c2-11.
Rule 15c2-11 was adopted by the SEC to protect investors from fraud in the over the counter (OTC) market. SEC staff explained back in 2021 that they intended to begin enforcing the rule in fixed-income markets, as well as equity markets. While that enforcement action was halted in 2021, the SEC has yet to provide updated regulatory clarity regarding the rule.
Downing said that applying the rule to fixed-income markets would deter dealers from offering fixed income securities to investors. It would also result in 30,000 fewer jobs each year over the next five years, 50,000 fewer jobs each year over the following five years, and 100,000 fewer jobs each year thereafter, Downing said, citing a 2022 study. Overall, he said it would decrease the U.S. GDP by $100 billion over the next ten years.
His Protecting Private Job Creators Act (H.R. 3959) would exempt fixed-income securities from the rule, protecting jobs and providing regulatory clarity for the U.S. fixed income market.
“The market for fixed income securities is a critical driver of consumer finance and job growth,” said Downing. “We cannot afford to mire this market in regulatory ambiguity. My common-sense legislation safeguards U.S. job creation by ensuring that rules tailored to over-the-counter securities are not misapplied to fixed income offerings.”
The bill is cosponsored by Rep. Cleo Fields (D-LA).
“While I appreciate the SEC’s role in protecting investors, we cannot allow regulatory agencies to suddenly reverse 50 years of established practice without proper notice,” Fields said. “Louisiana’s agricultural producers, manufacturers, and healthcare systems depend on stable capital markets to create jobs and serve our communities. The threat of eliminating tens of thousands of jobs nationwide—including good-paying positions in Louisiana—through hasty regulatory interpretation is unacceptable. We need legislative clarity to ensure our businesses can access capital markets predictably while maintaining appropriate investor protections.”
It also has the support of multiple organizations including the Securities Industry and Financial Markets Association (SIFMA), National Association of Manufacturers, American Securities Association, Investment Adviser Association, CRE Finance Council, US Chamber of Commerce, Loan Syndications and Trading Association, Structured Finance Association, Bond Dealers of America, Investment Company Institute, and Managed Funds Association.
“SIFMA has long supported exempting fixed income securities from the equity-focused Rule 15c2-11, and the Protecting Private Job Creators Act takes an important step in that direction,” SIFMA President and CEO Ken Bentsen said. “We commend Representatives Troy Downing (R-MT) and Cleo Fields (D-LA) for their leadership in introducing this legislation. By recognizing the fundamental differences between equity and fixed income markets, this bill will help ensure the continued efficient operation of our vital fixed income markets.”