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IAA Continues to Advocate for Reasonable Comment Periods, Requests Extension of Deadline for SEC Dealer Proposal

May 31, 2022

In another attempt to persuade the SEC to provide more reasonable deadlines for input on its sweeping rule proposals, the IAA has joined several other trade associations in a May 20 letter requesting that the SEC extend the comment period for its proposal on a further definition of “dealer” from the current 60-day period following publication of the proposing release on the SEC’s website to a 120-day period from the date of publication in the Federal Register. The letter explains that the industry and the public need a more appropriate amount of time to evaluate and comment on this complex proposal. The IAA has been a vocal advocate for extended comment periods, including a joint comment letter with other trade associations and an op-ed published in InvestmentNews.

The proposal seeks to redefine who is a “dealer” to capture market participants that are “providing an important liquidity provision function in today’s securities markets,” but have traditionally fallen within an exclusion from the “dealer” definition for persons trading for their own account but not as a part of a regular business. The proposal would expand the definitions of both “dealer” and “government securities dealer” by newly defining: (i) what it means to be “engag[ing] in a pattern of buying and selling securities that has the effect of providing liquidity to other market participants”; and (ii) a person’s “own account” that would be in scope for the new activities-based tests. The proposal vastly expands who would be considered a dealer and significantly limits the trader exclusion by imposing qualitative and quantitative tests that would aggregate advisers’ and their client accounts in certain circumstances.

The extension request letter notes that, given the scope of the proposed new requirements and the potential costs on market participants, particularly in the cash Treasury and Treasury futures markets, the current 60-day period simply does not afford the public enough time to understand and consider the potential impact of any new requirements, including assessing the costs of dealer registration and compliance and the potential economic impact and systemic risk implications for markets. Additional time to comment is particularly important given the need for interested parties – including the IAA – to prepare comments on several other SEC proposals at the same time. We remain hopeful that the SEC will recognize the importance of thoughtful stakeholder engagement and provide more realistic comment periods in future proposals.

The full comment letter is available on the IAA website.

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