October 31, 2019
The philosophy behind the proposed amendments to Rule 15c2-11 seems admirable and consistent with what the SEC has in mind for protection of retail investors. These proposed amendments appear to transfer the burden of proof from broker-dealers to the issuers themselves by requiring them to have readily available and current information in order to allow continuous quotation. In theory this seems logical, however it could be difficult to verify the accuracy and completeness of the information provided by all micro-cap issuers.
If its simply a requirement of providing current information, issuers who are engaged in manipulation could easily falsify their records. If its a requirement for broker-dealers to verify issuer information, that burden will most likely become too expensive for broker-dealers and they could halt quotation on any OTC security not large enough for exception all together (which hurts issuers who are legitimate in the OTC market). These rule changes are made to protect the retail investor but there could be unintended consequences.