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Derivatives

Structured Notes Issuers To Benefit From SEC Fast Lane

Structured product issuers are set to be among the beneficiaries of a Securities and Exchange Commission proposal to create a new category of issuers, which officials say could speed up the time it takes U.S. structuring houses to issue public products and also increase the number of deals.

Structured product issuers are set to be among the beneficiaries of a Securities and Exchange Commission proposal to create a new category of issuers, which officials say could speed up the time it takes U.S. structuring houses to issue public products and also increase the number of deals. The proposals were made at an open meeting last Tuesday and comments are due around year-end.

It is not clear, however, whether the rule will aid derivatives houses which do not report under U.S. GAAP, such as the European structured products giants BNP Paribas and Société Générale. They are required to provide accounting reconciliation statements with each public issue, which makes the process more arduous and has left them trailing their U.S. rivals in the public placements field. Officials at BNP and SG could not comment by press time.

To qualify for the category, dubbed 'Well-Known Seasoned Issuers,' an issuer must have been reporting under the Exchange Act for at least a year, or have either a public float of USD700million or have issued USD1 billion of registered debt in the last three years. Holland West, partner at Shearman & Sterling in New York, said this rule change will speed up the process of issuance. "The SEC [is] trying to respond to global capital markets and the necessity for speed in the capital markets," he added. The proposals revolve around allowing the issuer to inform potential investors about the product before it is registered. The proposals may do away with the 'quiet period,' a set of technical rules that have put constraints on issuers educating investors about their product, explained West.

The U.S. structured market is already booming. Structured Products Association data shows public structured note issuance is up 20% year-to-date. Anna Pinedo, partner at Morrison & Foerster in New York, believes the SEC is prepared to make regulatory changes that will support the market and these proposals are evidence of that.

 

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