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ARTICLE · 05 FEBRUARY 2021

Refresher: Determining The Initial Level After Pricing

Mayer Brown
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This article briefly discusses the legal issues arising from terms that are not determined on the trade date.

United StatesCorporate/Commercial Law
Bradley Berman
Bradley Berman
Zhaochen Dai
Zhaochen Dai
Anna T. Pinedo
Anna T. Pinedo
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Investors want to know the material terms of an investment, such as a structured product, in order to make an informed investment decision. Some material terms of a structured note may not be determined on the trade date, the day on which investors commit to purchasing the notes. For example, the starting value (or “initial level” or “initial price”) of an index- or stock-linked structured product is very often one of these terms. The starting value can be, as in a “look back” structured note, the lowest value of the underlying asset for a period of time after the trade date.

This article briefly discusses the legal issues arising from terms that are not determined on the trade date. When the starting value, for example, is unknown at the time of sale, the issuer's obligation to disclose material information under Rule 159 under the Securities Act of 1933 (the “Securities Act”) at or prior to the time of sale would be satisfied if the issuer disclosed the methodology

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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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