The Securities and Exchange Commission announced its decision to exempt Rule 144A debt, a type of corporate bond often issued by private companies, from its public disclosure requirements.
Following the announcement, the National Association of Manufacturers Chief Legal Officer Linda Kelly released the following statement.
“This order from the SEC is a landmark victory for manufacturers and a powerful affirmation of the NAM Legal Center’s ability to rein in regulatory overreach," Kelly said. "Our multipronged advocacy and litigation efforts, alongside the Kentucky Association of Manufacturers, forced the SEC to grapple with its complete lack of justification for applying potentially harmful public disclosure requirements on Rule 144A issuers, which would have required private businesses to disclose proprietary financial information publicly. We are thrilled that the Commission has reversed course on this unlawful attempt to impose a novel, onerous and wholly-unjustified regulatory mandate on private companies.”
Background
The SEC adopted a reinterpretation of SEC Rule 15c2-11, imposing the rule’s public disclosure requirements on private companies that raise capital via corporate bond issuances under SEC Rule 144A.
According to a recent EY economic analysis commissioned by the NAM, the SEC’s expansion of Rule 15c2-11 would have resulted in decreased liquidity and increased borrowing costs in the manufacturing industry and throughout the economy, leading to job losses exceeding 100,000 annually.
The NAM and the KAM filed petitions for rulemaking, calling on the SEC to reverse course by clarifying, either by rule or by exemptive order, that Rule 144A issuers are not required to make public financial disclosures.
After the agency temporarily delayed enforcement of its novel interpretation but failed to provide complete relief, the NAM and the KAM went to court, filing a lawsuit in federal district court challenging the Commission’s actions under the Administrative Procedure Act, along with parallel actions in the 6th Circuit seeking review of the agency’s failure to grant complete relief.
