December 15, 2023

Scott Urges Gensler to Rescind Rules Expanding Dealer Definition

Washington, D.C. – As the Securities and Exchange Commission (SEC) moves to finalize two rules that would expand the entities required to register as securities dealers, Ranking Member Tim Scott (R-S.C.) is urging the SEC to rescind the rules – arguing they are overly vague, lack economic analysis, and will reduce liquidity in U.S. Treasury markets. In a letter to SEC Chair Gary Gensler, Ranking Member Scott argued these burdensome rules will lead to tightening credit conditions for small businesses and limit investor choice. Unfortunately, this is yet another instance of Chair Gensler’s regulatory overreach.

In the letter, Ranking Member Scott wrote, “The SEC’s proposals contemplate the imposition of new, broad, and sweeping changes to the criteria for determining which market participants are required to register as dealers with the SEC, and therefore would significantly alter the existing relationship between dealers and those that purchase securities in the secondary market.”

The letter continued, “I am especially concerned that the additional compliance burdens and costs associated with registering with the SEC as a dealer may cause some market participants to exit the Treasury market entirely. Decreased participation in our Treasury markets will cause wider bid-ask spreads, which inherently lead to the inefficient pricing of Treasuries. Fewer participants in the Treasury markets will also lead to a potentially dangerous reduction in liquidity in those markets. These are risks we cannot afford to take.”

The letter concluded, “During a time of escalating debt levels, rampant inflation, and highly volatile economic conditions, introducing such sweeping policy changes that lack thorough analysis and public feedback is misguided. I urge you to rescind these ill-timed and poorly conceived proposals and go back to the drawing board to ensure that any rulemaking impacting the Treasury markets is justified, does no harm, and is supported by robust economic analyses.”

To read the full letter, click here.

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