Staff Guidance On Rule 144A Related Issues

On December 8, 2016, the staff of the Division of Corporation Finance provided additional guidance in the form of Compliance and Disclosure Interpretations ("C&DIs") related to the types of securities that may be counted toward the Rule 144A $100 million threshold.  For example, the C&DIs confirm that securities purchased and held on margin may be counted as "owned" for purposes of calculating whether the entity meets the $100 million threshold, provided that the securities are not subject to a repurchase agreement.  (Question 138.05).  Similarly, an entity may count securities that have been loaned to borrowers.  (Question 138.06)   However, the entity cannot count securities that it has borrowed, since these securities are not "owned."  (Question 138.07)  An entity also cannot count short positions in securities for the same reason—these do not represent an ownership interest.  (Question 138.08)