P.M. BRIEFING : SEC Expands Private Sales Role

The Securities and Exchange Commission expanded trading in unregistered securities today by major institutional investors, such as mutual funds, pension funds and insurance companies.

The SEC’s 4-0 vote to liberalize its Rule 144a is expected to increase the number of institutional buyers and sellers of securities that are offered for private sale rather than public sale on the stock and bond markets.

The sweeping rule change does not apply to individual investors, but they stand to benefit from it if they hold an interest in a mutual fund or pension fund that trades in “private placements.”

“This is truly an historic day for the commission,” SEC Chairman Richard Breeden told a crowded hearing. “The results should be a lower cost of capital in our marketplace.

By offering private placements, corporations find it much cheaper to sell stocks, bonds and other securities to investment houses instead of going the more traditional route of public offerings on Wall Street.

As a part of the change in the SEC rule, foreign companies will be able to sell stocks and bonds to investment houses without registering them or disclosing critical information about the offering.