Marlon Melson Jr. Comment On Regulatory Notice 25-06
Marlon Melson Jr.
Capital formation is the lifeblood of a thriving economy. It fuels business growth, innovation, and job creation. In the United States, however, an outdated and increasingly overreaching regulatory framework—specifically SEC Rule 15c2-11—has become a barrier rather than a bridge to economic vitality. Originally intended to protect investors from fraudulent or opaque over-the-counter (OTC) equities, the rule’s broad application now hampers legitimate capital formation, restricts retail trader access, and disproportionately disadvantages small businesses. Removing Rule 15c2-11 is a necessary step toward promoting efficient markets and expanding opportunities for both investors and entrepreneurs.
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Rule 15c2-11 effectively violates the principles of a free market economy by limiting who can participate and under what conditions. It restricts broker-dealers from quoting prices unless exhaustive disclosures are filed, even if there is investor demand and willingness to trade based on technical analysis, market sentiment, or independent research.
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There are growing concerns that the SEC’s expansion of Rule 15c2-11 may exceed its statutory authority, especially when applied to fixed income markets that Congress never intended the rule to govern. By preventing legitimate quoting activity, the rule acts as a form of de facto ban on trading certain securities, infringing on the right of individuals to freely buy and sell legal financial instruments. This may set a troubling precedent for regulatory overreach without Congressional oversight.
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Moreover, by restricting broker-dealers from making markets in securities without access to issuer disclosures, Rule 15c2-11 may also constitute a violation of antitrust law. It artificially limits competition in the marketplace by preventing firms from competing on the basis of alternative information analysis or market-making models. This barrier to entry consolidates quoting power in the hands of a few entities able to absorb the compliance burden, stifling innovation and excluding smaller or independent broker-dealers. By impeding fair competition and privileging select participants, the rule distorts natural market dynamics and raises serious concerns under the Sherman Act and other antitrust frameworks designed to preserve open, competitive markets.
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Retail investors—many of whom rely on technical analysis and chart patterns—are now unfairly restricted from accessing OTC securities, particularly those that lack current financial disclosures. Yet these traders often base their decisions on price action, volume, momentum, and trend indicators rather than fundamental disclosures. For them, technical analysis is sufficient for risk assessment and trade execution.
-
By enforcing disclosure requirements as a gatekeeping mechanism, Rule 15c2-11 assumes that retail traders cannot make informed decisions without company filings. This is both paternalistic and inaccurate, and it effectively shuts a significant segment of the trading community out of entire market segments.
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Perhaps the greatest harm is inflicted upon small and emerging companies, especially those in underserved or innovative sectors. These businesses often rely on OTC markets to raise early-stage capital, build investor confidence, and grow toward public offerings. The costs and complexity of meeting the disclosure requirements imposed by Rule 15c2-11 are prohibitive. As a result, many promising startups are cut off from critical funding opportunities.
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Instead of focusing on innovation and operations, small businesses are forced to divert time and resources to compliance, with no guarantee of capital in return. This is a classic example of regulation stifling growth, pushing businesses away from U.S. capital markets and into less regulated or foreign jurisdictions.
-
Removing Rule 15c2-11 would significantly promote capital formation by restoring liquidity, reducing compliance burdens, empowering retail investors, and encouraging entrepreneurship. The rule currently restricts broker-dealers from quoting securities without current public disclosures, limiting price discovery and market access even when there is investor demand. Eliminating this barrier would allow broker-dealers to quote and trade based on actual market interest, improving liquidity and transparency. It would also lower the costly and bureaucratic compliance requirements that disproportionately affect small issuers, freeing them to focus on innovation and growth. Retail traders, many of whom rely on technical analysis and market trends rather than issuer disclosures, are currently excluded from participating in large parts of the OTC market due to the rule’s constraints. Removing it would restore access and allow them to make independent investment decisions. Additionally, small businesses would benefit from earlier and broader access to capital, fueling job creation, innovation, and economic development. In short, repealing Rule 15c2-11 would modernize outdated regulation, align with free-market principles, and unlock greater participation and opportunity across the financial ecosystem.
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Removing or scaling back this rule would not dismantle investor protections—it would modernize them. In doing so, we would restore the freedom to invest, the ability to innovate, and the pathways for small companies to grow into tomorrow’s leaders.
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Marlon Melson Jr. Comment On Regulatory Notice 25-06
Capital formation is the lifeblood of a thriving economy. It fuels business growth, innovation, and job creation. In the United States, however, an outdated and increasingly overreaching regulatory framework—specifically SEC Rule 15c2-11—has become a barrier rather than a bridge to economic vitality. Originally intended to protect investors from fraudulent or opaque over-the-counter (OTC) equities, the rule’s broad application now hampers legitimate capital formation, restricts retail trader access, and disproportionately disadvantages small businesses. Removing Rule 15c2-11 is a necessary step toward promoting efficient markets and expanding opportunities for both investors and entrepreneurs.
-
Rule 15c2-11 effectively violates the principles of a free market economy by limiting who can participate and under what conditions. It restricts broker-dealers from quoting prices unless exhaustive disclosures are filed, even if there is investor demand and willingness to trade based on technical analysis, market sentiment, or independent research.
-
There are growing concerns that the SEC’s expansion of Rule 15c2-11 may exceed its statutory authority, especially when applied to fixed income markets that Congress never intended the rule to govern. By preventing legitimate quoting activity, the rule acts as a form of de facto ban on trading certain securities, infringing on the right of individuals to freely buy and sell legal financial instruments. This may set a troubling precedent for regulatory overreach without Congressional oversight.
-
Moreover, by restricting broker-dealers from making markets in securities without access to issuer disclosures, Rule 15c2-11 may also constitute a violation of antitrust law. It artificially limits competition in the marketplace by preventing firms from competing on the basis of alternative information analysis or market-making models. This barrier to entry consolidates quoting power in the hands of a few entities able to absorb the compliance burden, stifling innovation and excluding smaller or independent broker-dealers. By impeding fair competition and privileging select participants, the rule distorts natural market dynamics and raises serious concerns under the Sherman Act and other antitrust frameworks designed to preserve open, competitive markets.
-
Retail investors—many of whom rely on technical analysis and chart patterns—are now unfairly restricted from accessing OTC securities, particularly those that lack current financial disclosures. Yet these traders often base their decisions on price action, volume, momentum, and trend indicators rather than fundamental disclosures. For them, technical analysis is sufficient for risk assessment and trade execution.
-
By enforcing disclosure requirements as a gatekeeping mechanism, Rule 15c2-11 assumes that retail traders cannot make informed decisions without company filings. This is both paternalistic and inaccurate, and it effectively shuts a significant segment of the trading community out of entire market segments.
-
Perhaps the greatest harm is inflicted upon small and emerging companies, especially those in underserved or innovative sectors. These businesses often rely on OTC markets to raise early-stage capital, build investor confidence, and grow toward public offerings. The costs and complexity of meeting the disclosure requirements imposed by Rule 15c2-11 are prohibitive. As a result, many promising startups are cut off from critical funding opportunities.
-
Instead of focusing on innovation and operations, small businesses are forced to divert time and resources to compliance, with no guarantee of capital in return. This is a classic example of regulation stifling growth, pushing businesses away from U.S. capital markets and into less regulated or foreign jurisdictions.
-
Removing Rule 15c2-11 would significantly promote capital formation by restoring liquidity, reducing compliance burdens, empowering retail investors, and encouraging entrepreneurship. The rule currently restricts broker-dealers from quoting securities without current public disclosures, limiting price discovery and market access even when there is investor demand. Eliminating this barrier would allow broker-dealers to quote and trade based on actual market interest, improving liquidity and transparency. It would also lower the costly and bureaucratic compliance requirements that disproportionately affect small issuers, freeing them to focus on innovation and growth. Retail traders, many of whom rely on technical analysis and market trends rather than issuer disclosures, are currently excluded from participating in large parts of the OTC market due to the rule’s constraints. Removing it would restore access and allow them to make independent investment decisions. Additionally, small businesses would benefit from earlier and broader access to capital, fueling job creation, innovation, and economic development. In short, repealing Rule 15c2-11 would modernize outdated regulation, align with free-market principles, and unlock greater participation and opportunity across the financial ecosystem.
-
Removing or scaling back this rule would not dismantle investor protections—it would modernize them. In doing so, we would restore the freedom to invest, the ability to innovate, and the pathways for small companies to grow into tomorrow’s leaders.