MFA sent a letter to Trading and Markets Director Jamie Selway and his staff at the Securities and Exchange Commission (SEC) with recommendations for reforming Rule 105 of Regulation M to enhance capital formation.
While MFA fully support the goals of Rule 105, it has had a chilling effect on the ability or willingness of market participants to commit capital in Covered Offerings to the ultimate detriment of issuers and selling shareholders. As explained in the letter, MFA recommends the Commission:
- Initiate a rulemaking to amend Rule 105, or otherwise provide exemptive relief, to provide that the restricted period does not begin prior to the public disclosure of an offering
- Provide clarity regarding the timing of pricing, affirming that asset managers may reasonably rely on information from underwriters and/or broker-dealers concerning the timing of pricing of a Covered Offering
- Issue interpretive guidance clarifying that the Separate Account Exception, particularly Indicia 6, should be narrowly focused on whether senior management is actively directing one account to sell short and another to purchase in a covered offering, instead of broadly restricting other activity such as oversight or risk management
- Reconsider its approach to disgorgement calculations to take into account the market participant’s conduct in light of the policy objectives of the rule
