The SEC adopted Securities Act Rule 135d, providing that certain communications involving security-based swaps ("SBS") will not be considered "offers" that would constitute a public offering of a security required to be registered under the Securities Act.
Specifically, the final rule concerns (i) "the publication or distribution of price quotes that relate to security-based swaps that may be purchased only by persons who are eligible contract participants ('covered SBS') and are traded or processed on or through certain regulated platforms;" and (ii) the publication or distribution of research reports (as defined in Securities Act Rule 139(d)) that can only be purchased by eligible contract participants if (a) the research is published in the ordinary course of the broker-dealer or SBS dealer's business and (b) the publication is not the commencement of research by the broker-dealer or SBS dealer on the relevant issuer of the underlying security.
The new rule became effective on January 16, 2018.
Commentary / Nihal Patel
The new rule is fairly straightforward and addresses a potentially harmful result from the fact that Dodd-Frank expanded the Securities Act definition of "security" to include security-based swaps.
Perhaps what's more notable is the fact that the SEC, under Chairman Clayton, has remained virtually silent about their intentions with respect to regulating security-based swaps more generally. The adopting release offers little guidance on that point, though the SEC declined to extend certain interim final rules that provide exemptions under the federal securities laws for certain security-based swap transactions in effect prior to the adoption of Title VII. Instead, the SEC only noted (repeatedly) that the exemptions will expire on February 11, 2018.
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