Publications

The staff of the Division of Corporation Finance of the SEC issued an interpretive letter on December 1, 2011 to Bank of America, N.A. and Merrill Lynch, Pierce, Fenner & Smith Inc. (the “BAML Hedging Letter”) which has significant implications for holders of restricted securities and affiliates holding securities of an affiliated issuer (“control securities”) who wish to hedge their economic exposure to their stock positions through the use of forwards and options on an unregistered basis.  The BAML Hedging Letter harmonizes the guidance given in two earlier SEC interpretive letters – one with respect to prepaid share forward transactions hedged initially on an un-registered basis in compliance with Rule 144 and the other with respect to forwards and option-based transactions hedged initially on a registered basis.  In doing so, the BAML Hedging Letter provides clarification and confirmation of the Staff’s view that holders of restricted or control securities may hedge their holdings using forward and option-based contracts in reliance on the Rule 144 safe harbor and that, in connection with such contracts, dealers may, subject to certain conditions, offer and sell securities as part of the dynamic adjustment of their hedge positions on an unregistered basis.