SEC Expands Oversight with New Rules for Market Participants Acting as “Dealers” or “Government Securities Dealers”

The Securities and Exchange Commission (SEC) has taken a significant step in enhancing market integrity and transparency by introducing two new rules that mandate market participants undertaking key liquidity-providing roles to register with the SEC, become members of a self-regulatory organization (SRO), and adhere to federal securities laws and regulatory obligations. This move aims to ensure investor protection while fortifying market resiliency and transparency.

SEC Chair Gary Gensler expressed his backing of these regulations, stating, “I am pleased to support this adoption because it requires that firms that act like dealers register with the Commission as dealers, thereby protecting investors as well as promoting market integrity, resiliency, and transparency.” Gensler emphasized that these measures are essential to align with Congress’s intent, ensuring that all market participants, resembling de facto market makers, adhere to regulatory standards by registering as dealers.

The newly adopted Exchange Act Rules 3a5-4 and 3a44-2 refine the definition of “as a part of a regular business” in Sections 3(a)(5) and 3(a)(44) of the Securities Exchange Act of 1934. This clarification helps identify specific activities that categorize individuals engaging in these roles as “dealers” or “government securities dealers,” subjecting them to registration requirements outlined in Sections 15 and 15C of the Act concerning certain liquidity-providing functions.

According to the final rules, any entity partaking in activities outlined within the regulations will be deemed a “dealer” or “government securities dealer.” Unless exempted or granted an exception, these entities are mandated to register with the Commission under Section 15(a) or Section 15C, become SRO members, and adhere to federal securities laws, regulatory obligations, SRO rules, and Treasury requirements.

The release announcing the final rules will be published in the Federal Register, marking the initiation of a 60-day period before the rules take effect. Subsequently, the compliance date for the final rules is set for one year following the effective date.

By expanding oversight through these rules, the SEC is poised to strengthen market supervision, ensuring that entities playing significant liquidity-providing roles adhere to regulatory standards. This move is poised to bolster investor confidence, fortify market integrity, and enhance transparency within the financial markets.

Colonial Stock remains committed to supporting market participants in navigating these regulatory changes effectively. For expert guidance and assistance on compliance with the new rules, feel free to reach out to Colonial Stock’s knowledgeable team.

For more information or assistance regarding these rules and their implications for market participants, please contact Colonial Stock.

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