SEC Grants UBS No-Action Relief for Bail-In Conversions

The SEC's Division of Corporation Finance issued a no-action letter informing UBS Group AG it would not recommend enforcement were the bank to convert its outstanding debt or hybrid securities into new shares during a Swiss bail-in without registering the new shares.

The relief covers a bail-in ordered by the Swiss Financial Market Supervisory Authority ("FINMA"). FINMA would direct UBS to convert the outstanding securities into new shares if FINMA found that the bank had reached the point of non-viability.

The SEC said the exchange of the securities for new UBS equity is an "offer" and "sale" under Section 2(a)(3) (Definitions) of the Securities Act. The SEC said UBS could rely on the exemption in Section 3(a)(9) (Classes of securities under this subchapter) and not have to register the new shares. UBS is the issuer of both the original securities and the new shares.