Attorney Advertising
Volume 7, Issue 2 February 10, 2016
IN THIS ISSUE:
Is There a Standard Form of Rule 144A
Representation Letter? ............................ 1
Issuer Representations and
Frequent Issuers ...................................... 2
Rule 15a-6 and Structured Note Sales
Into the United States .............................. 3
How Many Years?: Disclosing Historic
Reference Asset Performance ................. 5
Tax Developments for Structured
Products ................................................... 6
The Structured Products Association’s
Comment Response Letter to the Federal
Reserve Board Regarding TLAC and
Structured Notes ...................................... 7
Is There a Standard Form of Rule 144A Representation Letter?
My file of Rule 144A representation letters has been growing fatter, and I‘m not su re why.
I would have hoped that by now there would be just one great form that I could point to, and recycle the rest of them.
After all, it should be kind of simple – investor represents to broker-dealer that it’s a QIB. The broker-dealer files the letter
in a safe spot, and the purchase price for the securities is wired. (Maybe there’s also a closing dinner?)
So, why are so many forms floating around?
Aside from many lawyers’ natural instinct to add text and make comments, there are a variety of reasons why some letters
differ from one another.
Additional Legal Qualifications. The representation letter may need to cover more ground than just QIB status. For
example, the relevant securities that are being offered may be limited to “qualif ied purchasers” under the 1940 Act,
“eligible contract participants” for commodities purposes, etc.
FINRA Suitability Rules. By selling to an “institutional account” that is exercising independent judgment, a broker-dealer
may have fewer obligations under FINRA’s suitability rules. For example, the broker-dealer may be selling to a registered
investment adviser that is exercising investment discretion for one of its customers. The broker-dealer may wish to have
the investor acknowledge this, in order to help document and record the broker -dealer’s process in making the sale.
Are You Sure You Know What You’re Doing? A key notion behind Rule 144A is that QIBs are more likely to understand
what they are buying. Still, in the event of a complex transaction, the broker-dealer may often want to memorialize this
point. Similarly, in the case of a reverse inquiry transaction, it may be worthwhile to note that the terms were proposed by
the investor, and not the issuer. In the case of an offering of a structured product with a complex underlier, such as the
