SEC Alert! Statement on proposal to Remove References of Credit Ratings from Regulation M. Rules 101 and 102 currently have an exception for investment-grade securities.
Reg M, a 26-year-old rule, prohibits parties involved in the distribution of securities from buying or selling securities or inducing others to buy or sell the securities. Rules 101 and 102 restrict the ability of certain offering participants to jump into the market to support the offering before their participation in the distribution is deemed complete.
Rules 101 and 102 currently have an exception for investment-grade securities. Under todayโs proposal, these exceptions would be modified or eliminated. For nonconvertible debt, nonconvertible preferred, and asset-backed securities in Rule 101, this standard in the exception would be substituted with appropriate alternative standards of creditworthiness. The exception in Rule 102, applicable to issuers, selling security holders, and their affiliated purchasers, would be eliminated.
