SEC proposes limiting Rule to equities, carves out crypto

The U.S. Securities and Exchange Commission on Monday proposed an amendment to Rule 15c2-11 that would restrict the rule’s broker-dealer reporting obligations to equity securities and exclude crypto assets from that framework. The agency opened a 60-day public comment period on the proposal.

Rule 15c2-11, adopted in 1971, requires broker-dealers to verify that basic information about an issuer is publicly available before publishing quotations in the over-the-counter market. The rule obliges firms to review and maintain current details about an issuer’s business, management and financial condition and prevents dealers from initiating or resuming quotations when required information is missing.

Regulatory changes adopted in 2020 and implemented in 2021 broadened how the rule could be interpreted, opening the possibility that it could apply beyond equities to other asset types. That expansion prompted questions about whether some digital tokens could fall under the rule if they were treated as securities.

Many digital tokens do not provide the structured disclosures that public companies publish. Some broker-dealers reduced quoting and trading in certain tokens because they could not meet the rule’s information standards. The SEC’s proposal would explicitly confine the rule to equity securities and state that those reporting obligations are not intended to apply more broadly to crypto assets while questions about token classification remain.

The commission said the amendment would not remove crypto assets from SEC oversight. The agency said it will continue to use its existing authorities to address fraud, market manipulation and to determine when a digital asset meets the legal definition of a security.

Commissioner Hester Peirce welcomed the proposal in a written statement, noting that the text of Rule 15c2-11 has long applied to quotations of a “security” but that market participants and others historically understood the rule as applying to over-the-counter equity quotations.

The SEC is seeking feedback from market participants, exchanges and industry groups during the 60-day comment period on whether the definition of equity securities should extend to crypto assets and on how Rule 15c2-11 should be applied going forward.

In a related development, Texas apparel firm Beba and the DeFi Education Fund voluntarily dismissed without prejudice a 2024 pre-enforcement suit against the SEC after Beba ran a free token airdrop in March 2024; the complaint argued the agency adopted digital-asset enforcement policy without notice-and-comment rulemaking, violating the Administrative Procedure Act. The filing cites work by the SEC Crypto Task Force, speeches by Commissioner Hester Peirce suggesting airdrops may not be securities, and a White House call for a safe harbor for certain airdrops.