SEC Approves Amendment to Remove References to Credit Ratings from Regulation M

The U.S. Securities and Exchange Commission (SEC) today adopted rule changes to remove and replace references to credit ratings from existing exceptions to Regulation M Sections 101 and 102, a set of rules that prohibit the possibility of artificially influencing an offering Securities market activity. Gensler said this adoption is in line with Congress' desire after the 2008 financial crisis to ensure that we do not embed a reliance on credit ratings in our rule set, but instead employ appropriate alternative measures of credit. The passage will be the sixth and final rulemaking by the SEC to carry out this mandate. When the amendments become effective, certain existing exceptions to Regulation M Sections 101 and 102 that reference the credit ratings of nonconvertible debt securities, nonconvertible preferred securities, and asset-backed securities will be eliminated and replaced by What is new is the exception rule based on alternative standards of creditworthiness. These alternatives include exceptions for nonconvertible debt securities and nonconvertible preferred securities of issuers that meet specified probability of default thresholds, as well as exceptions for asset-backed securities offered pursuant to an effective shelf registration statement filed on the Commission's Form SF-3.