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Federal Register / Vol. 86, No. 7 / Tuesday, January 12, 2021 / Proposed Rules
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D. Recordkeeping Requirement Finally, the Commission is proposing to require as part of the exemptive relief that OTC Link LLC preserve, for a period of not less than three years, the first two years in an easily accessible place, the following records:
1. Documents and information regarding OTC Link LLCs written policies and procedures related to the Expert Market, including records related to the implementation of such written policies and procedures;
2. Documents and information regarding any processes undertaken by OTC Link LLC that analyze information over time to identify whether the distribution of quotations published or submitted on the Expert Market is limited only to Qualified Experts and, as applicable, issuers of securities for which quotations are published or submitted on the Expert Market with respect to their own securities; and 3. Documents and information regarding OTC Link LLCs ongoing surveillance of the quoting activity and distribution of quotations published or submitted on the Expert Market, including any reports that identify exceptions to compliance with the written policies and procedures and the resolution of such exceptions.
The Commission preliminarily believes that this recordkeeping condition will help facilitate the Commissions oversight of the Expert Market, including of Subscribers that publish or submit quotations on the Expert Market and the distribution of such quotations. In particular, the documents and information that would be required to be maintained will provide the Commission with a record of how OTC Link LLC has 1
implemented its reasonably designed written policies and procedures described above; 2 conducted its ongoing maintenance of such written policies and procedures in response to analysis of whether quotations published or submitted on the Expert Market are distributed only to market data distributors including Subscribers, Qualified Experts, and, as applicable, issuers of securities for which quotations are published or submitted on the Expert Market with respect to their own securities; and 3
enforced such written policies and procedures as part of its ongoing surveillance of exceptions to compliance with those written policies and procedures. The Commission also preliminarily believes that these proposed recordkeeping conditions would aid the Commissions oversight of OTC Link LLCs limitation on the
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distribution of quotations published or submitted on the Expert Market only to Qualified Experts and, as applicable, issuers of securities for which quotations are published or submitted on the Expert Market with respect to their own securities.
E. Additional Considerations for Market Participants Relying on the Proposed Exemption In addition, Subscribers that publish or submit quotations in compliance with this proposed exemption remain subject to liability under the antifraud provisions of the federal securities laws.
Further, the proposed exemption would not create an exemption or change existing exemptions from the registration requirements or any other requirements under the federal securities laws, including the Securities Act, for any party. Accordingly, for example, if a Subscriber were to publish or submit a quotation on the Expert Market in reliance on the proposed exemption, the Subscriber would need to determine whether the security, or any offer or sale of such security, is registered in accordance with any applicable requirement under federal securities laws or whether an exemption from any such registration requirement exists.
III. Request for Comments The Commission is seeking comment on all aspects of the proposed exemption. In particular, the Commission requests comment on the following questions about the proposed exemption. When responding to the request for comment, please explain your reasoning. Additionally, the Commission requests that commenters identify sources of data and information as well as provide data and information to assist the Commission in analyzing the impact of the proposed relief.
1. Are there any other categories of securities that should be eligible for Subscribers proprietary quotations on the Expert Market? Are there any other categories of securities that should be excluded from Subscribers proprietary quotations on the Expert Market? For example, should only those securities that meet certain reported trade thresholds be eligible for quoting?
Please explain, including how this suggestion would be necessary or appropriate in the public interest and consistent with the protection of investors.
2. Are there categories of investors included in the proposed list of Qualified Experts who should be excluded? For example, should all accredited investors, as defined in Rule
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501a of Regulation D, be considered Qualified Experts, or should the list be limited to a narrower set of sophisticated investors? What steps should broker-dealers and investment advisers be required to take, if any, to verify the accredited investor status of customers before providing them access to quotations published or submitted on the Expert Market? Should all employees of an issuer, including those who would not otherwise qualify as Qualified Experts, be allowed to view quotations published or submitted on the Expert Market? Please explain, including how this suggestion would be necessary or appropriate in the public interest and consistent with the protection of investors.
3. Are there any other categories of persons or entities that should be eligible to view real-time or delayed quotations published or submitted on the Expert Market? The Commission understands that foreign broker-dealers, as defined in Exchange Act Rule 15a 6b3, similar to broker-dealers registered under Section 15 of the Exchange Actan entity included in the definition of accredited investor may demonstrate the ability to assess an investment opportunity, the capacity to allocate investments in such a way as to mitigate or avoid risks of unsustainable loss, the ability to gain access to information about an issuer or about an investment opportunity, or the ability to bear the risk of a loss. OTC Link LLC
has requested that such foreign brokerdealers be included in the list of Qualified Experts. Should foreign broker-dealers, as defined in Exchange Act Rule 15a6b3, be added to the list of Qualified Experts? Please explain why or why not, including how this suggestion would be necessary or appropriate in the public interest and consistent with the protection of investors.
4. What costs would be associated with the proposed Expert Market exemption? Please specify the market participants that would incur such costs e.g., issuers, broker-dealers, etc., if any. Would the cost of the proposed policies and procedures and recordkeeping conditions prevent the formation of an expert market for any eligible securities? Would the ability for issuers securities to be quoted on the Expert Market reduce incentives for relevant issuers to provide public information?
5. How active would quotations in these securities likely be if the proposed exemptive relief were granted? What degree of liquidity and price discovery would likely be facilitated by the ability of Subscribers to publish or submit
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