Tell Everyone! The Confidentiality Principles are Out

October 19, 2017 - The LSTA this week published exposure drafts of the revised LSTA Code Conduct (“Code”) and the Confidentiality Principles (“Code”). Those drafts are available by clicking here ; additionally, they will be discussed at a two-CLE session at the LSTA Annual Conference next Tuesday.  

The LSTA began the process of refreshing the LSTA Code of Conduct (2008), the MNPI Principles (2006) and the Confidential Information Supplement (2008) early this year with the goal of completing the project by year end and, indeed, the LSTA hopes to publish final documents on Thursday, November 16th

The project is critical because the Code and the Principles are fundamental bedrocks of the industry.  The purpose of the Code is to promote integrity, fairness efficiency and liquidity in the syndicated loan market by establishing general standards of conduct that are applicable to all loan market participants (“LMPs”) in connection with all loan market activities.  The purpose of the Principles is to outline broad guidelines for the receipt, use and distribution by and to LMPs of confidential information that is generally available in the loan market and that may at times include material non-public information (“MNPI”).  The goal of the Principles is to address the thorny issues that arise by virtue of the fact that many LMPs also participate in the securities markets that transact solely on the basis of public information. The project is timely because so much has changed in both the loan market and in the SEC’s knowledge of and engagement with the loan market in the many years since the Principles and the Code were published.  Interestingly, despite the passage of time and the many changes in the market, upon review, these critical documents have stood the test of time remarkably well. Please find a brief summary of the new documents below. 

Code of Conduct: The Code of Conduct establishes general principles of business conduct and related procedures for all market participants, compliance with which is completely voluntary. The 2017 Code now applies to all loan market activities, rather than solely trading activities. 

Confidentiality Principles: The 2017 Confidentiality Principles include both the contents of the 2006 MNPI Principles and the 2008 Confidential Information Supplement for ease of use. The Confidentiality Principles outline broad guidelines for the receipt, use and communication by and to loan market participants of confidential information that is generally available in the loan market. The Principles set forth the four types of information in the loan market: Syndicate Information, Borrower Restricted Information, Bank Loan Non-Restricting Information and Public Information. The Principles contain guidance on the trading implications of these different types of information, including Syndicate Information and Borrower Restricted Information which may contain MNPI. In addition the Principles highlight practices for "private side" and "public side" loan market participants and discuss important considerations for establishing information controls, policies and procedures. 

The publication of the exposure drafts is the result of many months of collaborative work by a working group led by LSTA Associate General Counsel Tess Virmani and assisted by outside counsel Yoon-Young Lee of WilmerHale   As mentioned above, the new Code of Conduct and Confidentiality Principles will be the subject next week of an in-depth and free-wheeling conversation moderated by Ms. Virmani among Ms. Lee, Alex Spiro of PNC, Robbie Scheininger of Reed Smith and James Gledhill of Citi. Please join us for our dedicated breakout session at the LSTA's 22nd Annual Conference in New York next Tuesday, October 24th. More information and registration is available here.

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