Representing financial professionals, financial institutions and investors in investment loss, employment and disclosure matters, and in regulatory investigations nationwide.

SEC proposes new rules requiring certain market participants to register as “dealers”

On Behalf of | Apr 11, 2022 | Financial News, FINRA Compliance

The Securities and Exchange Commission has announced it is proposing two new rules requiring more market participants to register as a “dealer” or “government securities dealer”. In a news release last week, the commission said the rules will further clarify the definition of a dealer in order to help identify principal trading firms and firms conducting similar activities that must register with the SEC.

The proposal would apply to entities such as proprietary trading firms who assume certain dealer functions, in particular those who provide liquidity in the markets. They would be required to register with the SEC, become members of a self-regulatory organization, and comply with federal securities laws and regulatory obligations.

SEC Chair Gary Gensler said the proposal reflects the intent of Congress that firms who provide liquidity in the securities markets should be registered with the commission. “Further, requiring all firms that regularly make markets, or otherwise perform important liquidity-providing roles, to register as dealers or government securities dealers also could help level the playing field among firms and enhance the resiliency of our markets,” said Gensler.

The proposed rules, Exchange Act Rules 3a5-4 and 3a44-2, would further define the phrase “as a part of a regular business” in Sections 3(a)(5) and 3(a)(44) of the Securities Exchange Act of 1934 to identify certain activities causing those engaging in such activities to be “dealers” or “government securities dealers”. They would then be subject to the registration requirements of Sections 15 and 15C of the Act.

The proposal defines a dealer and government securities dealer as one that engages “in a routine pattern of buying and selling securities that has the effect of providing liquidity to other market participants.”

The proposal will be published on and in the Federal Register and will be open for public comment.

At Lewitas Hyman, we counsel financial advisors, registered representatives, financial planners and other financial professionals in regulatory investigations involving the SEC, FINRA and other self-regulatory organizations. Our attorneys were formally senior attorneys in the SEC’s Division of Enforcement and have represented clients in regulatory matters while working at Morgan Stanley and in private practice at some of the world’s largest law firms. If you are the subject of a regulatory proceeding, contact us at (888) 655 6002 or through our online contact form for a free consultation.