10 Years On, SEC's Market Access Rule Still Lacks Clarity

• Ashley Bashur
• 10.11.2021

In an article published by Law360, Ashley Bashur and Paul Eckert discuss the SEC’s application of the market access rule over the past ten years. 

Excerpt: The first 10 years of the U.S. Securities and Exchange Commission's Rule 15c3-5, known as the market access rule,[1] have been a textbook example of the principle of regulation by enforcement, resulting in an informal patchwork of guidance, mostly led by decentralized self-regulatory organizations, or SROs, and the payment of approximately $80 million in fines.

While the SEC's goal of adopting a rule that was not overly prescriptive and that could be tailored to each firm's circumstances may have been well-intentioned, the lack of formal guidance following the rule's adoption led to unclear standards and moving targets for broker-dealers.

Broker-dealers subject to the rule — those that have or provide market access — would be better equipped to meet regulatory expectations if the SEC and SROs clarified those expectations through customary, broadly available interpretive pronouncements, especially since technology, trading and markets have changed significantly over the past 10 years, and conforming systems and procedures to evolving and, at times, conflicting expectations can be both inefficient and costly.

Instead, the SEC, the Financial Industry Regulatory Authority and various exchange SROs have chosen to articulate standards and expectations through a patchwork of public settlement documents with individual firms, and through informal speeches and conversations with counsel during the course of investigations.