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U.S. SEC delays certain assets from enforcement actions under new disclosure rule

Katanga Johnson
Updated ·2 min read
FILE PHOTO: The seal of the U.S. Securities and Exchange Commission (SEC) is seen at their headquarters in Washington, D.C.

By Katanga Johnson

WASHINGTON (Reuters) -The U.S. Securities and Exchange Commission (SEC) said on Friday that it would delay enforcement of certain assets from a new disclosure rule for off-exchange securities until Jan. 3, 2022.

The new compliance date was due to come into effect on Tuesday.

The agency's no action letter, which affects quotes published by broker dealers for buying and selling of government bonds, does not change or amend the compliance date for a new rule aimed at stamping out fraud in U.S. equities markets starting on Sept. 28, 2021, the agency said.

The position "concerns enforcement action only and does not represent a legal conclusion with respect to the applicability of statutory or regulatory provisions of the securities laws," the agency said.

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Next week's new measure aims U.S. 'pink sheets' in shakeup as securities regulator looks to stamp out fraud to boost investor disclosures by requiring off-exchange issuers to make accurate, up-to-date financial information publicly available. These are frequently penny-stock companies that do not meet the main exchanges' listing standards.

The requirements have sown confusion in the bond market as bankers, trading platforms and investors now face intense compliance demands ahead of an unforeseen month-end deadline.

The Financial Times reported this week that the new regulation may stave off broker dealers from trading in this space and taking on risks for fear of attracting an SEC enforcement action.

Bond trade associations, including the Bond Dealers of America and the Securities Industry and Financial Markets Association, wrote to regulators to say amended rules will have a “significant, deleterious effect” on government and corporate bond markets, and pleaded for an explicit reprieve, or more time to comply, the FT reported.

The SEC's Friday letter is a response to such cries by industry. While compliance is still mandatory by the Tuesday deadline, the top markets watchdog said its delay of enforcement actions is meant to allow for the necessary industry "operational and systems changes" that may lead to compliance with the rule.

(Reporting by Katanga Johnson in Washington, D.C.Editing by Chris Reese and David Gregorio)