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SEC delays certain assets from enforcement actions under new disclosure rule

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.The U.S. Securities and Exchange Commission (SEC) said on Friday that it would delay enforcement of certain assets from a new disclosure rule for off-exchange securities until Jan. 3, 2022, as the bond market got a three-month reprieve from a U.S. rule that traders said could cause big disruptions by preventing dealers from providing certain price quotes.

The new compliance date was due to come into effect on Tuesday.

The agency’s no-action letter, which affects quotes published by broker-dealers for buying and selling of government bonds, does not change or amend the compliance date for a new rule aimed at stamping out fraud in U.S. equities markets starting on Sept. 28, 2021, the agency said.

The position “concerns enforcement action only and does not represent a legal conclusion with respect to the applicability of statutory or regulatory provisions of the securities laws,” the agency said.

Next week’s new measure aims at U.S. ‘pink sheets’ in shakeup as securities regulator looks to stamp out fraud to boost investor disclosures by requiring off-exchange issuers to make accurate, up-to-date financial information publicly available. These are frequently penny-stock companies that do not meet the main exchanges’ listing standards.

The requirements have sown confusion in the bond market as bankers, trading platforms and investors now face intense compliance demands ahead of an unforeseen month-end deadline.

The new regulation may stave off broker-dealers from trading in this space and taking on risks for fear of attracting an SEC enforcement action.

Bond trade associations, including the Bond Dealers of America and the Securities Industry and Financial Markets Association, wrote to regulators to say amended rules will have a “significant, deleterious effect” on government and corporate bond markets and pleaded for an explicit reprieve or more time to comply.

The SEC’s Friday letter is a response to such cries by industry. While compliance is still mandatory by the Tuesday deadline, the top markets watchdog said its delay of enforcement actions is meant to allow for the necessary industry “operational and systems changes” that may lead to compliance with the rule.

Meanwhile, Wall Street ended a choppy session higher to extend gains after their best day since July, with investors looking past regulatory concerns in China and focusing on optimism over the U.S. economic recovery.

The advance did not extend to all risk assets, however. Renewed signs of an escalating crackdown on cryptocurrencies in China sent prices of the major digital tokens tumbling. Bitcoin added to its downslide with a further 6% fall to hover just under $41,000 at session lows, while Ethereum sank nearly 10% to below $2,800.

This came after the People’s Bank of China (PBOC) issued a statement barring domestic and overseas financial institutions and payments companies from providing cryptocurrency transactions and other services in China.

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