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Dealer

SEC Spring 2025 Regulatory Agenda

The SEC has published its semi-annual Spring 2025 regulatory agenda (“Agenda”) and plans for rulemaking.  The Agenda is published twice a year, and for several years I have blogged about each publication.  Although items on the Agenda can move from one category to the next, be dropped off altogether, or new items pop up in any of the categories (including the final rule stage), the Agenda provides valuable insight into the SEC’s plans and the influence that comments can make on the rulemaking process.

The Agenda is broken down by (i) Prerule Stage; (ii) Proposed Rule Stage; (iii) Final Rule Stage; and (iv) Long-term Actions.  The Prerule, Proposed and Final Rule Stages are intended to be completed within the next 12 months and Long-term Actions are anything beyond that.  In what is the shortest Agenda I have seen, the number of items to be completed in a 12-month time frame is 23, down from 30 on the Fall 2024 Agenda

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September 23, 2025

Court Strikes Down Recent Changes To Definition Of A Dealer

In a big win for hedge funds and the crypto industry, on November 21, 2024, a Texas federal judge overturned the recent SEC rule that expanded the definition of “dealer” under the Exchange Act.  For a review of the final rule see HERE.

The amendments were intended to require certain proprietary or principal traders and liquidity providers to register as either a dealer or government securities dealer as applicable.  The rules amended Exchange Act Rules 5a5-4 and 3a44-2 to enhance the definition of “as part of a regular business” in Sections 3(a)(5) and 3(a)(44) of the Exchange Act.

In a legal challenge, the Crypto Freedom Alliance of Texas and Blockchain Association sued the SEC claiming that the rule amendments radically expanded the definition of a “dealer” in a way that could encompass digital asset industry participants (and hedge funds) that do not engage in any conduct resembling “dealing” as that term has ever been

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December 10, 2024

SEC Adopts Changes To The Definition Of A “Dealer”

Two years after proposing rule changes (see HERE) the SEC has adopted final new rules amending the definition of a “dealer” under the Exchange Act.  Although the rule change comes after years of a continuous stream of litigation against small-cap and penny stock convertible debt lenders, the new rules specifically fail to provide regulatory clarity to this sector of the marketplace.

The amendments are intended to require certain proprietary or principal traders and liquidity providers to register as either a dealer or government securities dealer as applicable.  The rules amend Exchange Act Rules 5a5-4 and 3a44-2 to enhance the definition of “as part of a regular business” in Sections 3(a)(5) and 3(a)(44) of the Exchange Act.  The enhancement, however, is as to large proprietary traders and government securities dealers, leaving small cap traders to continue with rule making through judicial precedence.

Background

Although the amended rules are not limited to participants in the U.S. Treasury markets,

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May 14, 2024

SEC Proposed Changes To The Definition Of A “Dealer”

Following a continuous stream of litigation against small-cap and penny stock convertible debt lenders, the SEC has proposed some statutory changes to the definition of a “dealer” under the Exchange Act.  The SEC’s enforcement attack on convertible debt lenders began in 2017 and has been decried by industry participants as regulation by enforcement which, unfortunately, is not resulting in judicial orders or settlements offering clear guidance (see HERE).  Also, unfortunately, the proposed new rules, which were published in March 2022 and are likely to reach final rule stage this year, still do not help small-cap investors navigate the regulatory highway.

The rule is intended to require certain proprietary or principal traders and liquidity providers to register as either a dealer or government securities dealer as applicable.  The proposed rules would amend Exchange Act Rules 5a5-4 and 3a44-2 to enhance the definition of “as part of a regular business” in Sections 3(a)(5) and 3(a)(44) of the Exchange Act.

Proposed Rules

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November 8, 2022

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