Key facts
- The SEC will not object to certain securities transactions for UBS's resolution.
- This allows UBS to convert debt securities into equity without U.S. registration.
- The move facilitates a potential 'bail-in' scenario, converting debt to equity.
- The guidance addresses cross-border legal issues highlighted by Credit Suisse's rescue.
The U.S. Securities and Exchange Commission (SEC) has informed UBS Group that it will not object to certain securities transactions that the bank may need to undertake if directed by Swiss regulators to ensure an orderly resolution. The SEC stated it would not pursue enforcement action if UBS converts specific debt securities into equity without registering the offering with the U.S. regulator, thereby removing a potential legal obstacle.
This guidance is relevant to a potential 'bail-in' scenario, a crisis-management tool designed to recapitalize a failing lender by converting designated debt securities into equity, rather than relying on taxpayer funds. The SEC clarified that a debt-to-equity exchange ordered by Switzerland's financial regulator would be considered an 'offer' and 'sale' of securities under U.S. law, but could qualify for an exemption from Securities Act registration requirements.
The SEC's letter aims to resolve cross-border legal conflicts that became apparent during the Swiss authorities' handling of Credit Suisse's resolution plan, which ultimately led to a rescue takeover by UBS.