Finance Firms Wary of Being Swept Up in Creeping SEC Dealer Rule

The SEC is quietly expanding its definition of “securities dealers” subject to tighter agency oversight, triggering a pushback from some private funds and investment advisers that are leery of more regulations.

The Securities and Exchange Commission is finalizing a rule that, as proposed, would clarify and expand the definition to include some financial firms—such as high-frequency traders—that have traditionally not been considered a dealer.

Industry advocates say the agency also is using recent lawsuits against penny-stock flippers to go further than it’s likely to do in its rulemaking—to stake out the position that a “dealer” is any company whose business ...