Two-fer Week At The SEC: Two No-Action Letters; Two New CDIs; and Two New Volcker Rule FAQs
Over the past seven days the SEC proved the old adage wrong. Good things don’t come in threes, they come in twos. SEC staff published two no-action letters, two new Compliance and Disclosure Interpretations (“CDIs”), and two new frequently asked questions and answers (“FAQs”) regarding the implementation of the Volcker rule.
No-Action Letters. The first no-action letter was issued by the Division of Corporation Finance and addresses abbreviated, five-day tender offers for non-convertible debt securities. The no-action position is notable not only for the relief it provides, but also for how it was obtained. Attorneys from 18 different law firms collaborated to submit and obtain the relief.
The no-action relief supersedes all previously issued relief relating to abbreviated offering periods in non-convertible debt tender offers. The no-action letter confirms that the Division of Corporation Finance will not recommend any enforcement action if an offeror conducts a tender offer for non-convertible debt securities and holds the tender offer open for at least five business days from and including the date the tender offer is first published by means of “immediate widespread dissemination” and continues to hold open the tender offer for at least three business days from and including the date of the announcement of any material change in the offer other than a change in the consideration offered. Unlike the previously issued no-action position, the relief requires “immediate widespread dissemination” of offer materials; employs a business day instead of a calendar day construct; allows for offers to be made with Qualified Debt Securities; and eliminates the distinction between investment grade and non-investment grade debt securities. View the no-action letter here.
The second no-action letter was issued by the Division of Trading and Markets, which advised it will not recommend enforcement action under Rule 10b-10 of the Securities Exchange Act of 1934 against broker-dealers effecting repurchase transactions on behalf of their institutional customers that rely on MarketAxess’ electronic platform to satisfy confirmation delivery obligations to their institutional investors if all of the disclosures required by Rule 10b-10 are provided electronically. View the no-action letter here.
Compliance and Disclosure Interpretations. The Division of Corporation Finance added Question 279.01 and Question 118.01 to its CDIs. Question 279.01 concerns Securities Act Rule 905, which provides that any “restricted securities” under Rule 144 that are equity securities of a domestic issuer will continue to be deemed to be restricted securities notwithstanding that they were acquired in a resale transaction pursuant to Rule 901 or 904. The CDI clarifies that Rule 905 only applies to equity securities that, at the time of issuance, were those of a domestic issuer. Therefore, a holder of restricted securities, which were originally acquired from a foreign private issuer in a transaction described in Rule 144(a)(3) (other than Rule 144(a)(3)(v)), may resell those securities offshore pursuant to Rule 904 and without regard to Rule 905, even if the issuer no longer qualifies as a foreign private issuer at the time of resale. View Question 279.01 here.
Question 118.01, concerns Rule 304(e) of Regulation S-T, which requires information filed with the SEC to be in a searchable form. The CDI notes that with regard to required disclosures, a filer may present required information using graphics that are not text-searchable and still comply with Rule 304(e) if the filer also presents the same information as searchable text or in a searchable table within the filing. Any additional information that the filer chooses to include in the filing and that is not required to be disclosed may be presented graphically without a separate text-searchable presentation. View Question 118.01 here.
Volcker Rule Guidance. The Division of Trading and Markets added two new FAQs regarding the implementation of the Dodd-Frank Act’s Volcker rule. The first addresses when banking entities subject to metrics reporting must begin doing so within 10 days of the end of each calendar month. Beginning with metrics for the month of August 2015, banking entities must submit metrics within 10 days of the end of the month. As a result, metrics for the month of August 2015 must be reported by September 10, 2015.
The second discusses the Treasury Department’s Separate Trading of Registered Interest and Principal of Securities (“STRIPS”) program. Under the program, eligible Treasury securities are authorized to be separated into principal and interest components and transferred separately. Because these separate principal and interest components are backed by the full faith and credit of the United States, the interest-only and principal-only components also are exempt from the Volcker rule. View the Volcker Rule FAQs here.