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ARTICLE · 28 DECEMBER 2023

Syndicated Term Loans Are Not Considered "Securities"—For Now

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Market participants are relieved after the Second Circuit recently affirmed the lower court's decision in Kirschner v. JP Morgan Chase Bank, N.A. applying the Reves four-part test to conclude...

CanadaCorporate/Commercial Law
Erica R. S. Goldman
Erica R. S. Goldman
Jonathan Wiener
Jonathan Wiener
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Market participants are relieved after the Second Circuit recently affirmed the lower court's decision in Kirschner v. JP Morgan Chase Bank, N.A.1 applying the Reves four-part test to conclude syndicated term loans do not constitute "securities". But the industry should remain cautious.

What you need to know

  • Relief for institutional lenders. The Second Circuit's holding in Kirschner closely follows established precedent, reassuring institutional lenders concerned that loans and market participants would be subjected to additional regulations.
  • Residual uncertainty in the courts. Given that the Reves four-factor "family resemblance" analysis—which assesses parties' "motivations" and "reasonableness"—is inherently open to judicial interpretation through fact-specific analysis, it is advisable to carefully structure and draft syndicated term loan transactions.

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