January 13, 2022 - Looking at the SEC’s Rulemaking Agenda, one thing is very clear for 2022 – the SEC has high hopes for proposed rulemakings and several may have loan market implications. Some have received a lot of attention, like the highly-anticipated proposed rulemakings on corporate and fund ESG disclosure, and some more unexpected.

First, the SEC launched a reproposal of Rule 9j-1 – over 10 years after the first proposal was shelved. Proposed rule 9j-1 targets security-based swaps, which would include LTRS and LCDS, and would impose anti-fraud rules on those products. The LSTA engaged on the first proposal in 2010 and is developing its response to the December reproposal. (A full analysis of that reproposal is forthcoming).

Second, as WSJ recently reported, the SEC has turned its sights on private companies.  Proposals on Regulation D and Form D Improvements as well as on Revisions to the Definition of Securities Held of Record – both slated for release this fall – are expected to target the increase in large private companies that bypass the IPO process. The SEC has made it clear they see these “unicorns” and other large private companies as potential threats to the economy and to investors and that transparency is needed.  Many in the financial markets, as well as the two Republican SEC Commissioners, are against SEC efforts in this area. However, the Commissioners supportive of the SEC’s efforts are in the majority (especially with the resignation of Commissioner Roisman later this month.) Any changes to private company reporting would be the beginning of a new chapter for the SEC. Little detail is known about these proposals so far, but this is certainly a space to watch.

The proposals described above are not the SEC’s only interest in private companies. When Acting Chair Alison Lee requested public input on climate change disclosures in March 2021 Question 14 asked “What climate-related information is available with respect to private companies, and how should the Commission’s rules address private companies’ climate disclosures, such as through exempt offerings, or its oversight of certain investment advisers and funds?” This question garnered attention from Congressman and industry members alike – although reactions differed. While Senator Pat Toomey excoriated the SEC in a letter over purported overreach from its current mandate, in contrast, some industry comment letters supported mandated disclosure by private companies. For more information on impeding ESG regulation, please read the “ESG Regulation Looms Large” article in the LSTA’s Special Winter edition of Loans Magazine.

Whether it be on ESG matters or more broadly for large private companies, it seems the tide is set to turn for some in corporate America.

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