The SEC granted exemptive relief to certain European banking organizations from Regulation M prohibitions in connection with distributions of certain contingent convertible debt securities. The applicable debt securities convert into equity in the event that the banking organizations are under financial duress and require more capital. The exemption permits continued trading in the equity securities of the banking organizations at the same time that the convertible securities are being distributed, on the theory that the convertible securities will essentially trade like debt instruments so that their price will not be materially affected by transactions in a banking organization's equity securities.
The exemptive letter also outlines specific conditions that the convertible securities must satisfy in order to qualify for the exemptive relief.
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