Defining Issues | December 2021

 

Insight

SEC issues reminders on LIBOR transition

Disclosures for registrants and considerations for investment professionals when recommending LIBOR-linked securities.

The SEC staff statement recommends that issuers prepare qualitative and quantitative disclosures (if material) to inform readers of their LIBOR transition progress. Additionally, the SEC staff reminded investment professionals of their fiduciary requirements with respect to LIBOR-backed securities.

Applicability

  • All public companies

Relevant dates

  • Effective immediately 

Key impacts

The SEC staff’s statement reminds issuers that:
  • Qualitative or quantitative disclosures (if material) should be provided to inform investors of their transition progress, including risks, risk mitigation, and anticipated impacts to the company.
  • Cross references or other summaries should be included if disclosures are provided throughout a filing to help investors understand all LIBOR transition impacts.

Additionally, Lindsay McCord, Chief Accountant of the Division of Corporation Finance, highlighted the statement at the AICPA Conference on Current SEC & PCAOB Developments. She shared that disclosures should include what has been done to identify impacts of LIBOR exposure, mitigate the identified risks, and indicate what steps remain in the transition process. Disclosures should also avoid boilerplate language and evolve as the effective date draws near. 

The staff’s statement also includes reminders and considerations for investment advisors and broker dealers, including their fiduciary duty to clients when recommending LIBOR-linked investments and ensuring securities are in line with a client’s goals and risk objectives. 

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