Proposed in March 2022, the new rules are designed to further define the phrase “as a part of a regular business” as used in the statutory definitions of “dealer” under Section 3(a)(5) and “government securities dealer” under Section 3(a)(44) of the Exchange Act. These new rules will help the SEC in its endeavor to protect investors and promote market integrity, resiliency, and transparency.

Under the adopted rules, individuals that engage in either of the following activities, as part of a regular business, would be a “dealer” or “government securities dealer” if they:

• regularly express trading interest that is at or near the best available prices on both sides of the market for the same security and communicate and represent that interest in a way that makes it accessible to other market participants
• earn revenue primarily from capturing bid-ask spreads, by buying at the bid and selling at the offer, or from capturing any incentives offered by trading venues to liquidity-supplying trading interest

Structured Data Requirement

The amendments to the Modernization of Beneficial Ownership Reporting rule generally shorten the filing deadlines for initial and amended beneficial ownership reports filed on Schedules 13D and 13G. They also require Schedules 13D and 13G filings to be prepared using a structured, machine-readable data language. The new filing deadline for Schedule 13G goes into effect on September 30, 2024, and the rule’s structured data requirements have a one-year implementation period that concludes on December 18, 2024.

The final rules go into effect 60 days after the date of publication in the Federal Register. The compliance date for the final rules will be one year after the final rules go into effect. 

Sources:

SEC Adopts Rules to Include Certain Significant Market Participants as “Dealers” or “Government Securities Dealers” (sec.gov)