On August 24, 2023, a bench of three judges from the 2nd Circuit unanimously ruled that syndicated term loans under scrutiny are not considered as “securities” under the test laid out by the Supreme Court in the Reves v. Ernst & Young case. Akin Gump Strauss Hauer and Feld LLP provided a detailed report on this.
This verdict affirms the practices that have been followed in the financing markets, particularly the syndicated loan market, for a significant length of time. As such, this decision has been positively received by these markets.
The ruling also showcases valuable guidance to the participants within these markets. It specifies the handling of syndicated loans, providing clarity within the industry. Importantly, it highlights how these loans are to be treated as separate from “securities” as per the Reves v. Ernst & Young test.
In the larger context, this ruling throws light on the understanding and interpretation of the law in terms of financial instruments and transactions. The verdict has given rise to discussion and speculation regarding its long-term effect on the syndicated loan market and how it will shape the practices followed in the industry.