This month the Securities and Exchange Commission (“SEC”) issued a final rule (the “Final Rule”) that provides that certain communications relating to security-based swaps (either singular or plural, “SBS”) will not constitute “offers” for purposes of Section 5 of the Securities Act of 1933 (the “Securities Act”). Section 5 generally requires that an offer or sale of a security be registered under the Securities Act or made pursuant to an exemption from registration, and the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) defined securities for many purposes to include SBS. The Final Rule makes clear that the publication or distribution of certain price quotes relating to SBS, and of certain research reports discussing SBS, will not constitute offers of the related SBS for purposes of Section 5 and thus should not require registration. The Final Rule became effective upon its publication in the Federal Register on January 16, 2018.

While market participants will likely welcome the Final Rule, its accompanying release (the “Final Rule Release”) appears to throw cold water on the hope that the SEC will decide generally to exempt many SBS from registration. Offers and sales of SBS have historically not been subject to registration, and the SEC has instituted interim exemptions, which remain in effect, for registration and certain other requirements with respect to SBS. Accordingly, the market has generally not prepared for the potential necessity to register offerings of SBS.