July 10, 2023 - On June 30th the Securities and Exchange Commission (the “Commission”) requested a seven-day extension, until July 18^th, of the deadline to submit an amicus brief to the US Court of Appeals for the Second Circuit (the “Court”) in the Kirschner case.  This was the SEC’s third extension request (we recently discussed its second such request) and the motion was (finally) granted by the Court on July 7^th, only four days before the deadline.  To briefly recap, in March the Court asked the Commission to weigh in on whether the Term Loan B at issue in the case was a security under the Supreme Court precedent, Reves v. Ernst & Young. The original deadline set by the Court was April 13^th, subsequently extended to June 27^th and then to July 11^th.

The Commission’s latest request was not opposed by the litigation’s principals and noted that since the Court’s most recent order extending the deadline to July 11^th, “Commission counsel have continued to coordinate with other Commission staff members in relevant divisions to determine the appropriate response to the Court’s question that should be submitted to the Commission for its consideration and approval. Commission staff may not file an amicus brief without approval by a majority of Commissioners, and the additional seven-day extension will allow for adequate time for Commission review and approval.”  The Commission assured the Court that it did not anticipate needing any additional extensions and agreed to a week’s extension of the principals’ deadline to respond until August 31^st.

There has been much speculation over the Commission’s continuing need to extend the deadline but the simplest explanation is probably the most likely.  The issue before the Commission is extremely complex, raising both legal and policy issues, and the consequences of a submission that concludes that the loan is a security could be very material.  Moreover, the Commission has been consulting with the banking agencies, the litigation principals and several trade associations including, primarily, the LSTA must get approval from a majority of the Commissioners to file an amicus brief.  All these things take time, apparently significantly more time than the Commission initially expected. The LSTA expects to respond to the SEC’s submission with a brief of its own by the new August 31^st deadline.