In its highly anticipated decision, the Second Circuit has answered the question of whether a syndicated term loan qualifies as a “security” with a definitive “no”. On August 24, the Court of Appeals for the Second Circuit issued its ruling, affirming the lower court’s holding in Kirschner that leveraged loans are not securities. After the Securities and Exchange Commission (SEC) declined to submit a brief, the court determined, in its application of the Reves test, that three of the four Reves factors weighed against concluding that the complaint plausibly alleged that the loans in question are securities.
In March , the Court of Appeals for the Second Circuit requested that the Securities and Exchange Commission (SEC) submit a brief on whether a syndicated term loan qualifies as a “security.” The brief was highly anticipated after the SEC requested multiple extensions to submit. However, on July 18, the SEC relayed to the court that they will not be filing a brief, stating that “Despite diligent efforts to respond to the Court’s order and provide the Commission’s views, the staff is unfortunately not in a position to file a brief on behalf of the Commission in this matter. We greatly appreciate the Court’s indulgence and regret any inconvenience this may have caused the Court or the parties.”