The top Republican on the Senate Banking Committee urged SEC Chair Gary Gensler to rescind two rule proposals that would expand the definition of a securities dealer and require more firms to register with the agency.
In a letter dated Dec. 14, Sen. Tim Scott, R-S.C., wrote that the proposals "are overly vague, lack complete economic analysis, and will likely reduce liquidity in U.S. Treasury markets, creating widespread, adverse impacts for the American economy and Main Street investors."
The proposals, which the SEC issued in March 2022, would require market participants "that assume certain dealer-like roles and/or engage in certain levels of buying and selling government securities" to register with the SEC, join a self-regulatory organization and comply with federal securities laws and regulations, according to an SEC fact sheet.
The new process for identifying such participants would include qualitative standards as well as a quantitative standard to determine when a participant's actions are "part of a regular business," the fact sheet states.
Scott contends that adopting this new criteria "would significantly alter the existing relationship between dealers and those that purchase securities in the secondary market."
"I am especially concerned that the additional compliance burdens and costs associated with registering with the SEC as a dealer may cause some market participants to exit the Treasury market entirely," Scott wrote in his letter.
He also expressed concern with what he said are the proposals' lack of "economic impact analyses," as the SEC has said it's not sure how many parties would be affected.
"I urge you to rescind these ill-timed and poorly conceived proposals and go back to the drawing board to ensure that any rulemaking impacting the Treasury markets is justified, does no harm, and is supported by robust economic analyses," Scott wrote.