Speaking in the context of the secondary market for the securities of privately held companies, Luis Aguilar, former Commissioner of the SEC, recently voiced concern that the "piggyback" exception of Exchange Act Rule 15c2-11 may compromise the integrity of market quotations and hinder the creation of a fair and efficient secondary market by allowing broker-dealers to rely on potentially stale issuer information. Pursuant to this exception, if an OTC security has been quoted during the past 30 calendar days, and during those 30 days the OTC security was quoted on at least 12 days without more than four consecutive business days without quotations, then a subsequent broker-dealer may "piggyback" off of this previous quotation and does not need to meet the requirements of Rule 15c2-11. Rule 15c2-11 sets forth procedures for the submission and publication of quotations by broker-dealers for certain OTC securities. For more information, see our client alert available at: http://www.mofo.com/~/media/Files/ClientAlert/2016/04/160405PrivateSecondaryMarkets.pdf
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
© Morrison & Foerster LLP. All rights reserved
