August 29, 2024 - The following article first appeared in the Summer 2024 issue of Loans Magazine.
In the wake of the many recent threats and challenges to the broadly syndicated and private credit markets, the LSTA’s government policy and advocacy teams have been in high gear. Following is a brief summary of some of their efforts.
Our government policy team, led by Tess Virmani and assisted by Andrew Berlin and Elizabeth Yazgi, has been deeply involved in combating the SEC’s aggressive regulatory agenda. We’ve scored some important victories including a rationalization of the SEC’s Conflicts in Securitizations Rule vis-avis CLOs, the exemption of CLOs from the Private Fund Advisers Rule (“PFAR”), and, most recently, the successful prosecution of a lawsuit against the SEC (together with other trade associations) that resulted in the PFAR being entirely vacated. The policy team continues its important engagement on the SEC’s Liquidity Risk Management Rule for open-end loan funds, the Safeguarding Rule, the Predictive Data Analytics Rule and the Outsourcing Rule.
The LSTA has also worked extensively with other trade associations in submitting comment letters, exchanging information, Congressional advocacy and, as noted above, litigating against the SEC. Most recently, the LSTA joined two joint trade association letters pushing back on the SEC in connection with the proposed Outsourcing Rule arguing in the first letter that the SEC lacked statutory authority to impose the rule and, more recently, asking the SEC to withdraw the rule proposal in light of the Fifth Circuit’s decision on the PFA Rule.
Another major area of focus for the LSTA’s policy team is private credit. The policy team has been building out an education and engagement initiative for private credit amid heightened global regulatory scrutiny. To that end, the LSTA has established and convened a Senior Advisory Committee on Private Credit to address emerging critical issues. The committee, in turn, has established a Private Markets Subcommittee to focus on tactical execution, deal/market dynamics, policy application to aid in new product/content and data projects as well as a Private Credit Operations Sub-Committee that will focus on strategic and tactical procedures for deal structure and closing, loan servicing and ongoing maintenance, and trading and settlement to achieve operational accuracy, efficiency and best practices for private credit.
The LSTA has also engaged on the issue of “judge shopping”. In February, we joined with the Creditor Rights Coalition submitting a proposed amendment to the bankruptcy court rules that would prohibit bankruptcy courts from establishing “complex case panels” within their districts and require random assignment of complex cases within a district. Subsequent to the submission of the proposed amendment, two bills were introduced in the Senate that are designed to legislate the same result. While those bills are unlikely to move in the current session, they are likely to be reintroduced next year and we will be ready to re-engage.
Our advocacy team, led by Elliot Ganz, has been deeply engaged on Capitol Hill, developing important relationships with key members of both the House of Representatives and Senate, and advocating on behalf of the credit markets on all the legislative and regulatory markets issues described above. In the first six months of the year, Elliot has met with more than 25 members of Congress and their staff, mostly members of the committees that supervise the federal securities and banking regulatory agencies.
An important part of the LSTA’s advocacy efforts is the Business Loans Coalition (“BLC”), the LSTA’s individual-membership grassroots advocacy affiliate that allows members to participate more directly in the political process on behalf of the credit markets. Membership in the BLC is free, with no obligations, and joining should not require compliance approval. You can join the BLC by clicking here.
