A federal appeals court in New York is asking the Securities and Exchange Commission to share its views on whether syndicated loans are securities, the court said in an order Thursday.
(Bloomberg) — A federal appeals court in New York is asking the Securities and Exchange Commission to share its views on whether syndicated loans are securities, the court said in an order Thursday.
Any reclassification of syndicated loans as securities under the SEC would have enormous consequences, forcing issuers and banks to adhere to more regulations and forcing a rethink of the way issuers tap capital markets. The syndicated loan market is around $1.4 trillion in size.
Syndicated leveraged loans are not considered securities under SEC laws, but the market’s evolution into one resembling high-yield bonds has brought that into question.
The US Court of Appeals heard arguments in a case involving the status of leveraged loans last week.
“Given the importance of the issue, the parties’ diverging positions, and the policy implications that would result from our resolution of this case, we hereby solicit any views that the United States Securities and Exchange Commission may wish to share on this issue,” wrote the Clerk of the Court, Catherine O’Hagan Wolfe.
Comments from the SEC are due by no later than April 13, 2023, according to the document.
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