January 29, 2024 - As we noted last November, the SEC  issued exemptive relief with respect to the application of Rule 15c2-11 (the “Rule”) to 144A securities, including, most relevantly, CLO securities. The LSTA had pressed for this result in partnership with SIFMA. While the SEC in December 2022 deferred the application of the Rule to fixed-income securities for two years, the exemptive relief seemed to put the issue to bed, likely for good.

Last week, Congressman Alex Mooney (R. WV) introduced H.R. 7092, the “Protecting Private Jobs Creators Act.”  According to Congressman Mooney, the bill would exempt all fixed income securities, not just 144A securities, and would prevent the SEC from walking back its exemptive relief in the future. Senator Bill Hagerty (R-TN) introduced the same legislation in the Senate.

As we previously explained, for 70 years the Rule had only been applied to equities but in 2021 the SEC proposed to extend the Rule to fixed income securities, including CLOs. Under the Rule, broker-dealers would have had to obtain and review for accuracy and timeliness public information about issuers, such as their earnings statements, before they could begin or maintain a secondary market in fixed-income securities.  The LSTA supports the Protecting Private Jobs Creators Act. The legislation would codify the exemption for all fixed-income securities from Rule 15c2-11 compliance (including 144A securities), consistent with the SEC’s historical practice. We will continue to closely follow the progress of this legislation.