Sep. 10, 2025
Dear Commissioners, This letter respectfully requests that the SEC amend Rule 15c2-11 to address the unintended and harmful consequences the current rule imposes on the liquidity of preferred stocks and bonds, particularly those affected by corporate buyouts and restructurings, as well as fixed-income trading platforms such as Interactive Brokers. Rule 15c2-11, originally adopted in 1971 to prevent fraud in the penny stock market, has recently been broadly interpreted to apply to OTC fixed income securities and certain preferred stocks—many of which have become illiquid or effectively untradeable. This expansive application appears far outside the rule’s original intent and has materially harmed investors. A typical example is the preferred stock of legacy railroad companies like Allegheny & Western Railway Co. and Dayton & Michigan Railroads (symbols AWRY, DMRRP), now buried within CSX Corp. These securities, along with many similar legacy preferreds, have been relegated to the so-called “Expert Market” due to lack of current issuer information filings after corporate acquisitions. As a result, broker-dealers and trading platforms refuse to quote or facilitate trades in these securities, greatly diminishing liquidity and market access for investors who hold them. Further compounding this issue is the extensive list of fixed income securities that broker-dealers such as Interactive Brokers consider restricted under Rule 15c2-11, largely sourced from Bloomberg’s compliance data. This has led to widespread restrictions on trading in many investment-grade bonds on electronic platforms, depriving investors of price transparency and reasonable trade execution opportunities. Retail/individual investors observe: Sharp price declines and reduced volume in OTC preferred stocks suddenly categorized as “no information” or “expert market” securities. Difficulty or inability to place market-on-close, limit-on-close, or other order types on affected securities. Disparate broker-dealer policies, with some brokers banning purchases altogether, while others permit limited selling only. The consequences of delisting, “going dark,” or corporate reorganizations leading to drastic price decreases and loss of liquidity despite no change in underlying creditworthiness. This factor alone allows companies to take advantage of individual investors by delisting preferred stock (particularly after a buyout) and then buying back their own preferreds at artificially low prices on the expert market, or making below market tender offers which investors are often forced to take as their only way out of the security. These consequences run counter to the SEC’s mandate to protect investors and maintain fair, orderly, and efficient markets. By imposing heavy compliance burdens designed for equity penny stocks onto fixed income and preferred stock markets, Rule 15c2-11 has inadvertently restricted legitimate secondary market activity and harmed holders’ ability to realize value. It is thus respectfully urged that the Commission: Amend Rule 15c2-11 to carve out permanent exemptions or tailored relief for fixed income securities, preferred stocks, and other OTC securities affected by corporate restructurings, acquisitions, or delisting that continue to trade with adequate market interest and credit quality, and force broker's to implement these changes. Adopt measures similar to those in the recent no-action relief for Rule 144A securities to restore liquidity and quoting activity in OTC fixed income markets. Facilitate clearer coordination with FINRA, OTC Markets, and broker-dealer platforms to harmonize listing and quoting standards that minimize investor harm and market disruption. There is no reason why investors should be forced to have multiple brokerage accounts simply because some brokers restrict some securities while others restrict other securities. Thank you for your consideration of this crucial matter that affects many fixed income and preferred stock investors. I encourage the Commission to act promptly to modernize Rule 15c2-11’s application and restore fair access to these vital markets. Respectfully submitted, Yehuda Alpert