ABA Letter to SEC on Concept Release on Harmonization of Securities Offering Exemptions

Re: SEC Concept Release on Harmonization of Securities Offering Exemptions. File No. S7-08-19; 84 Fed. Reg. 30460 (June 26, 2019).

The American Bankers Association (ABA) appreciates this opportunity to comment on the Securities and Exchange Commission’s (Commission) Concept Release. The Concept Release solicits comments on exemptions from registration for the offer and sale of securities under the Securities Act of 1933 (1933 Act). Through this review, the Commission seeks to identify ways to simplify, harmonize, and improve the exemption framework in order to promote investment opportunities, while keeping in place appropriate investor protections. The Release discusses a variety of registration exemptions, including those for securities restricted to sophisticated or “accredited” investors, as well as safe harbors for the resale of restricted securities to qualified institutional buyers under 17 CFR 230.144A (Rule 144A).

ABA is writing on behalf of its member banks, savings associations, and trust companies (collectively, “banks”) that sponsor and maintain collective investment funds for their fiduciary clients. Some of the provisions under Rule 144A unnecessarily limit the ability of these bank-maintained funds to invest in securities offered and sold pursuant to registration exemptions that rely upon a purchaser’s status as a qualified institutional buyer (QIB), thereby restricting investor access to certain investment strategies.

As part of the effort to improve and harmonize the exemption framework, we urge the Commission to modernize through formal rulemaking the QIB definition as discussed below. The changes requested would eliminate the substantial inconsistencies and potential for confusion present under the current structure of Rule 144A. Specifically, ABA urges the Commission to amend Rule 144A(a)(1)(i)(F) as follows: (1) remove the reference to H.R. 10 plans; and (2) expand the definition to include common trust funds, as described below. In addition, we ask that the Commission expand the availability of the “family of investment companies test” found in Rule 144A(a)(1)(iv) to bank collective investment funds.