Insights & News

SEC Expands Dealer Definition to Increase Regulation of Liquidity Providers, Now Challenged in Federal Court

March 20, 2024
Client Alert

The U.S. Securities and Exchange Commission (SEC) recently voted 3-2 to adopt
Rules 3a5-4 and 3a44-2 (New Rules) under the Securities Exchange Act of 1934 (Exchange Act), as amended, to further define the phrase “as a part of a regular business” as it is used in the statutory definitions of “dealer” and “government securities dealer.”1 Going into effect on April 29, 2024, with implementation one year later, the New Rules significantly expand the definitions of “dealer” and “government securities dealer” (collectively, dealer) to include market participants that engage in the regular purchase and sale of securities with the effect of providing liquidity to other market participants. With the validity of the New Rules facing a recent challenge in federal court, however, it remains to be seen whether they will remain on the books. 


Read the Full Article.

1 See Further Definition of “As a Part of a Regular Business” in the Definition of Dealer and Government Securities Dealer in Connection with Certain Liquidity Providers, Rel No. 34-99477 (February 6, 2024), 89 FR 14938 (April 29, 2024) (Adopting Release). (SEC Commissioners Hester Peirce and Mark Uyeda dissenting.)

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