Press Releases

LMA welcomes IOSCO Final Report on Leveraged Loans and CLOs Good Practices for Consideration

On 3 June 2024, IOSCO published its Final Report on Leveraged Loans and CLOs Good Practices for Consideration. This report reflects results of the public consultation to which the LMA responded on 14 December 2023. In our response to IOSCO, we made the following key points:
 

• Loans are not securities and should not be subject to regulation modelled on the securities markets;  
• Participants in these markets are sophisticated and comfortable with negotiating terms to suit their commercial interests; 
• Need to retain public / private side discretion; 
• Good practices should reflect the current roles of participants (e.g., arrangers, underwriters, borrowers, sponsors, legal advisers) and not impose inappropriate obligations on them; 
• The industry is already looking to address many of the issues raised, such as transparency and timely disclosure, for example through the LMA/ELFA Best Practice Guide for Term Sheet Completeness.

 
The final report states that it sets out good practices, and that "while the good practices do not comprise either standards or recommendations as per IOSCO's taxonomy, they are designed to support market participants in their decision making when operating in the LL and CLO markets". This indicates that the good practices are not intended to form the basis for new regulation / legislation, but to act as a reference point. As the IOSCO Chair, James Andronis noted, the measures “will provide further support on the usage of existing industry best practices guides”.  
 
The proposed measures also appear to be drafted in a way that is more consistent with loan markets (as opposed to securities markets). For example, IOSCO recognises that these are highly negotiated transactions. 
 
 
 Nicholas Voisey, Managing Director – LMA, said
 “IOSCO does not seek to reinvent the wheel in its final report, but rather points participants towards existing guidance in the area and encourages them to use that guidance (e.g., ECB Guidance on Leveraged Transactions and the ELFA / LMA Best Practice Guide for Loan Term Sheet Completeness), where this is "available and applicable to a jurisdiction". 
 
 
“LMA welcomes that IOSCO have listened to many of the comments made in our response to the initial consultation. It is particularly noted that IOSCO recognize and supports the initiatives the industry is taking to address some of the issues raised around transparency and timely disclosure, for example highlighting the LMA / ELFA Best Practice Guide for Term Sheet Completeness.”