The Question and Answer Board

[janice shell]

Unless they mean this, from the final Rule 15c2-11:

6. Grace Period—Rule 15c2-11(f)(3)(ii)

The Commission posed a question in the Proposing Release about whether the piggyback exception should include a grace period during which a broker-dealer could continue to publish or submit quotations following the expiration of the proposed six-month period specified in paragraph (f)(3)(ii) of the proposed Rule. The Commission inquired about the length of such a grace period and the role of an IDQS or the use of tags to identify quotations for any security of an issuer if its information has not been made publicly available within a specified time frame.

Several commenters offered solutions to address broker-dealer quotations that are no longer eligible for the piggyback exception. These commenters supported the idea of a “grace period” with respect to companies that are no longer eligible to be publicly quoted (e.g., because their information is no longer “current” or because a broker-dealer cannot rely on any exception to the Rule) to serve as a notice to investors and issuers, allow time to take appropriate action before the loss of quote eligibility (e.g., remedy the absence of current and publicly available information), and facilitate investor transactions in the securities.361 One commenter advocated for a minimum of 90 days for such a grace period. Another commenter requested clarification as to, if such a grace period were implemented, when a broker-dealer would be required to cease publishing or submitting quotations (e.g., whether the broker-dealer would be required to cease publishing or submitting quotations on the next business day rather than intra- day).

The Commission has determined to adopt a grace period in the piggyback exception to permit broker-dealers to continue quoting securities of any issuer for a limited period once the requisite information for such issuer is, depending on the regulatory status of the issuer, no longer current and publicly available, timely filed, or filed within 180 calendar days from a specified period.364 This limited, conditional grace period is designed to provide the opportunity for investors to liquidate positions into a broker-dealer-quoted market for up to 15 calendar days from the publicly available determination that the issuer’s information is no longer current and publicly available, timely filed, or filed within 180 calendar days from a specified period. A longer period of time, such as 90 days, as suggested by one commenter, would allow a quoted market for an issuer’s security to be maintained in the absence of issuer transparency, which is inconsistent with the objective of the amendments to the Rule.
Specifically, paragraph (f)(3)(ii) of the amended Rule provides a limited grace period to rely on the piggyback exception if issuer information is, depending on the regulatory status of the issuer, no longer current and publicly available, timely filed, or filed within 180 calendar days from a specified period—or, the time frames specified in paragraph (f)(3)(i)(C) of the amended Rule—so long as three conditions are met. First, a qualified IDQS or registered national

securities association must make a publicly available determination that the specified information for such issuer is no longer current and publicly available, timely filed (with respect to an issuer for which documents and information are specified in paragraph (b)(3)(ii) or (b)(3)(iii) of the amended Rule), or filed within 180 calendar days from a specified period (with respect to an issuer for which documents and information are specified in paragraph (b)(3)(i), (b)(3)(iv), or (b)(3)(v) of the amended Rule)365 within the first four business days that such information is no longer current and publicly available, timely filed, or filed within 180 calendar days from the specified period, as applicable.366 Accordingly, if the qualified IDQS or registered national securities association were to make a publicly available determination five business days after the issuer’s information is, depending on the regulatory status of the issuer, no longer current and publicly available, timely filed, or filed within 180 calendar days from the specified period, broker-dealers would not be afforded a grace period to quote the issuer’s security. The Commission believes that this condition is important to facilitate immediate notice to market participants—including retail investors—that an issuer’s information is no longer current and publicly available, timely filed, or filed within 180 calendar days from the specified period, as applicable.

Further, as discussed below in Part II.H, the Commission is requiring that any qualified IDQS or registered national securities association that makes a publicly available determination that a broker-dealer may rely on the piggyback exception must subsequently make a publicly available determination if that issuer’s paragraph (b) information is no longer current and publicly available, timely filed, or filed within 180 calendar days from the specified period, as applicable. The qualified IDQS or registered national securities association must make such subsequent publicly available determination within the first four business days that such documents and information are no longer current and publicly available, timely filed, or filed within 180 calendar days. To ensure the wide availability of such notice to market participants, the Commission strongly encourages, and Commission staff intends to offer assistance and support to, qualified IDQSs and the registered national securities association to establish a means to tag, or otherwise provide freely available public indication of notice, that an issuer’s paragraph (b) information is no longer current and publicly available, and that, as a result, the security has entered the 15-calendar-day grace period before it is ineligible to maintain its quoted market through reliance on the piggyback exception. However, the Commission also recognizes the importance of accommodating the flexibility of qualified IDQSs and national securities associations in displaying notices and information to broker-dealers, market participants, and investors; therefore, the indication of such notice may take different forms. In this regard, a registered national securities association could append a fifth letter identifier to the security’s symbol, or an indicator could be displayed on the website of a qualified IDQS or a registered national securities association next to the security’s name or quote, to provide sufficient notice to investors and other market participants that the issuer’s security has entered the 15-calendar-day grace period.
Second, the grace period is conditioned on the broker-dealer’s compliance with the requirements of paragraphs (d)(2) and (f)(3)(i), except for the requirement regarding the public availability of current issuer information, timely filed issuer information, or issuer information that is filed within 180 calendar days from the specified period, as applicable. In other words, under the amended Rule, a broker-dealer may rely on the piggyback exception during the grace period only if each of the other conditions in the piggyback exception is met—the quotation must not be for the security of a shell company (unless the quotation is published or submitted within 18 months of the initial priced quotation for such issuer’s security in an IDQS), the quotation must represent a bid or an offer at a specified price, and no more than four days in succession may elapse without a quotation for the security—and the broker-dealer must comply with the recordkeeping requirements in paragraph (d)(2).
Lastly, paragraph (f)(3)(ii)(C) of the amended Rule specifies the duration of the grace period: the shorter of the period beginning with the date on which a qualified IDQS or registered national securities association makes a publicly available determination identified in paragraph (f)(3)(ii)(A) and ending on either (1) the specified issuer information being current and made publicly available or filed, or (2) the fourteenth calendar day following the date on which such publicly available determination was made.371 Therefore, if the specified issuer information is current and made publicly available, or is filed, during the fourteen calendar days following the publicly available determination identified in paragraph (f)(3)(ii)(A), the grace period ends on that date. While the grace period ends on such date, piggyback eligibility under paragraph (f)(3)(i)(A) of the amended Rule resumes on such date, assuming all conditions in that paragraph are met. Specifically, broker-dealers may continue to rely on the piggyback exception to publish quotations after the grace period ceases to apply if: (1) the documents and information specified in paragraph (b)(3) of the amended Rule for a reporting issuer were filed within 15 calendar days starting on the date on which the qualified IDQS or registered national securities association makes a publicly available determination that the issuer’s paragraph (b) information is no longer timely filed or filed within 180 calendar days from a specified period, and (2) all other requirements in paragraph (f)(3)(i) were met. Similarly, broker-dealers may continue to rely on the piggyback exception to publish quotations after the grace period ceases to apply if: (1) the documents and information specified in paragraph (b)(4) or paragraph (b)(5)(i) are current and publicly available within 15 calendar days starting on the date on which the qualified IDQS or registered national securities association makes a publicly available determination that the issuer’s paragraph (b) information is no longer current and publicly available, and (2) all other requirements in paragraph (f)(3)(i) were met. However, if the specified issuer information is not made current and publicly available, or is not filed, during the 15 calendar days starting on the date of a publicly available determination identified in paragraph (f)(3)(ii)(A), a broker- dealer may no longer rely on the piggyback exception and would need to either comply with the information review requirement or rely on another of the amended Rule’s exceptions to resume a quoted market in the security.

https://www.sec.gov/rules/final/2020/33-10842.pdf