SEC Division of Corporation Finance no-action letter: Bank of England

London
Freshfields LLP
100 Bishopsgate
London EC2P 2SR
T +44 20 7936 4000 (Switchboard)
F +44 20 7832 7001
LDE No 23
E doug.smith@freshfields.com www.freshfields.com Doc ID EUROPE-LEGAL-317438014/2 Our Ref 006940-1441 BDS Freshfields LLP is a limited liability partnership registered in England and Wales with registered number OC334789. It is authorised and regulated by the Solicitors Regulation Authority (SRA no. 484861). For further regulatory information please refer to https://www.freshfields.com/en-gb/footer/legal-notice/. A list of the members (and of the non-members who are designated as ‘partners’) of Freshfields LLP is available for inspection at its registered office, 100 Bishopsgate, London EC2P 2SR. Any reference to a partner means a member, or a consultant or employee with equivalent standing and qualifications, of Freshfields LLP or any associated firms or entities. April 10, 2026 Dear Mr. Ingram, Mr. Turk and Ms. O’Hara Exchange of Bail-in Securities We are writing on behalf of our client, the Bank of England (the “Bank”), to request that the staff of the Division of Corporation Finance (the “Staff”) of the U.S. Securities and Exchange Commission (the “Commission”) confirm that it will not recommend any enforcement action to the Commission if, in the context of a failing or failed UK bank or designated investment firm (a “Firm”), the Bank directs the exchange of Bail-in Securities1 (as defined below) in that Firm for ordinary shares (or the net proceeds thereof) in the Firm as part of its exit from resolution without registration under the US Securities Act of 1933, as amended (the “Securities Act”), in the manner described herein. Any such exchange will be directed by the Bank in accordance with the exercise of its statutory bail-in powers under the UK Banking Act 2009, the Bank’s published approach to resolution2 and this Letter. 1 Including instruments qualifying as regulatory capital and as meeting the Firm’s minimum requirements for own funds and eligible liabilities (“MREL”), in each case comprising “securities” within the meaning of
section 2(a)(1) of the Securities Act (“Bail-in Securities”). 2
See The Bank of England's approach to resolution, BANKOFENGLAND.CO.UK, https://www.bankofengland.co.uk/paper/2023/the-bank-of-englands-approach-to-resolution (as updated April 10, 2026) (the “Purple Book”) and Executing bail-in: an operational guide from the Bank of England, BANKOFENGLAND.CO.UK, https://www.bankofengland.co.uk/paper/2026/operational-guide-tobail-in-resolution (as updated April 10, 2026) (the “Operational Guide”). Jonathan Ingram Adam Turk Emma O’Hara Division of Corporation Finance U.S. Securities and Exchange Commission 100 F Street, NE Washington, D.C. 20549

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Securities Act section 3(a)(9), 15 U.S.C. § 77c(a)(9) Background In accordance with the Bank’s published approach to resolution, in the event of the failure (or likely failure) of a Firm, the Bank may 3 exercise its bail-in powers to write down or convert directly or indirectly the Firm’s shares, Bail-in Securities, and, if necessary, other liabilities of the failed Firm (collectively the “Bail-in Liabilities”) into equity or other securities. 4 The Bank reserves the right to modify the way in which bail-in powers are exercised in any particular case. Typically this process is initiated over a weekend (referred to as a “Resolution Weekend”) and entails (inter alia):
 the making and publication of a Bail-In Resolution Instrument 5 by the Bank, which initiates the resolution, identifies the instruments and liabilities subject to bail-in and specifies the treatment of such instruments and liabilities, listed by International Securities Identifying Number (“ISIN”) or other relevant identifier and effects the bailin of those instruments and liabilities;  the transfer of title by operation of law to all existing ordinary shares of the failed Firm to a third-party depositary bank appointed by the failed Firm and the Bank, at nil consideration payable to, and without the consent of, the holders. Alternatively, the existing ordinary shares may be transferred to and held by the Bank, again for nil consideration and without the consent of the holders. Subsequently, all voting rights attaching to such ordinary shares will be exercisable by the resolution administrator of the failed Firm (appointed under the Bail-In Resolution Instrument) or the Bank. Ordinary shares transferred in this manner will be held in trust on behalf of the bailedin creditors in accordance with the terms of the Bail-in Resolution Instrument; and Typically, the Bank would apply bail-in to the largest, most complex Firms subject to its jurisdiction. From January 1, 2026, (a) where an institution has between £25 billion and £40 billion in total assets, the Bank will consider which of a transfer or bail-in strategy is more likely to be appropriate (making the assessment on an institution specific basis); and (b) where an institution has more than £40 billion in total assets it is likely that the bail-in strategy will be set. See Statement of policy: The Bank of England’s approach to setting a minimum requirement for own funds and eligible liabilities (MREL), WWW.BANKOFENGLAND.CO.UK, https://www.bankofengland.co.uk/paper/2025/sop/mrel-statement-ofpolicy-july-2025-updating-2021 (July 2025)). The Bank has broad authority under the Banking Act 2009 to bail-in all liabilities of a failed Firm (including liabilities which are not “securities” within the definition of section 2(a)(1) of the Securities Act). However, the resolution strategy for any particular Firm will be based on ensuring that there is sufficient loss-absorbing capacity in Bail-in Securities so that it will not be necessary to bail-in other liabilities that are not securities. The relief requested in this Letter concerns only the exchange of Bail-in Securities for ordinary shares, and not exchanges of other Bail-in Liabilities which are not “securities” within the meaning of section 2(a)(1) of the Securities Act. A Bail-in Resolution Instrument is an instrument required to be made by the Bank pursuant to the Banking Act 2009 to exercise its resolution powers in respect of a named Firm. The instrument has the effect, by operation of English law, of cancelling or writing down the capital and regulatory capital instruments of the Firm and converting them into or exchanging them for
ordinary shares or other instruments, each as set out in the instrument.

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Securities Act section 3(a)(9), 15 U.S.C. § 77c(a)(9)  the suspension of trading and (except in respect of certain “in-flight” transactions 6 ) settlement of any other UK-listed securities of the failed Firm. The treatment of Bail-in Liabilities (including Bail-in Securities) will depend on the way in which the bail-in is structured, which may include (as determined by the Bank):
 writing down those Bail-in Liabilities in part or in whole at the commencement of the resolution;  an immediate write-down in part of those Bail-in Liabilities with the possibility of a further write-down at a later stage once the independent equity valuation has been completed;  the identification of Bail-in Securities (and any other Bail-in Liabilities) which are to be bailed in in whole or in part and the transfer of such Bail-in Securities to the depositary bank with the write-down taking place in a single stage once the independent equity valuation has been completed; or  a combination of such approaches. Following the Resolution Weekend, the bail-in period will continue for such time as is necessary to value the failed Firm’s assets and liabilities, thereby determining the total losses required to be absorbed by the write-down, dilution or cancellation of Bail-in Liabilities and to complete the business reorganisation plan of the failed Firm. The Bank anticipates that this period would typically last no more than six months (but could be longer, depending on the complexity of the case). 7

The exposure of shareholders and creditors to losses in resolution would respect the order in which they would have received distributions in an insolvency of the failed Firm with the objective of leaving them no worse off than they would have been if the Firm had been placed into an insolvency process. In this context, transactions in Bail-in Securities where the buy or sale order has been executed prior to the entry into resolution, but transfer of legal title has not yet settled. During the bail-in period, Firms whose ordinary shares or other financial instruments (including Bail-in Securities) were admitted to trading on a regulated market, multilateral trading facility or other organized trading facility would continue to be subject to the UK Market Abuse Regulation (“UK MAR”), requiring the disclosure of “inside information” (information of a precise nature that (a) has not been made public, (b) relating directly or indirectly to an issuer or financial instrument which (c) if made public, would be likely to have a significant impact on the prices of those financial instruments). Firms would also continue to be subject to the periodic and current reporting requirements of any listing venue to which the ordinary shares or other financial instruments were admitted to trading, which in the case of ordinary shares listed on the London Stock Exchange include the UK Disclosure Guidance and Transparency Rules and UK Listing Rules. Firms with a class of securities registered under section 12(b) or 12(g) of the US Securities Exchange Act of 1934, as amended (the “Exchange Act”), would continue to be subject of the applicable periodic and current reporting requirements thereunder. In addition, the Bank will itself expect to announce, following publication of the Bail-in Resolution Instrument, certain matters relating to the operation of the bail-in and resolution as provided in the Operational Guide and Purple Book.

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Securities Act section 3(a)(9), 15 U.S.C. § 77c(a)(9) The specified implementation of the bail-in process described in the Purple Book and Operational Guide may, in certain circumstances, implicate the registration requirements under the Securities Act. 8 To address this, the Bank has developed and incorporated an alternative structure into the Purple Book and Operational Guide. Under the Bail-in Resolution Instrument in this alternative structure, the holders of Bail-in Securities which have been or will be written-down would be granted contingent beneficial interests created by virtue of the Bail-in Resolution Instrument, entitling such holders to ordinary shares of the Firm upon exit from the resolution process or, in certain circumstances, the net cash proceeds of the sale of such shares. These contingent beneficial interests are referred to as Potential Rights to Onward Property or Proceeds (“PROPPs”) and the beneficiaries entitled to such PROPPs as the “PROPP Beneficiaries”. The PROPPs will be divided into classes to correspond to the relevant loss-exposure rank order. PROPPs would have the following characteristics:
 all bailed-in investors, regardless of the immediate write-down treatment of their Bailin Securities (as described above), would be entitled to PROPPs of the relevant class in proportion to their holding of the underlying Bail-in Securities by operation of the Bail-in Resolution Instrument;  each class of PROPPs will not have a fixed value until the conclusion of the bail-in period described below (and a given class may have an ultimate value of nil);  the PROPPs will be created pursuant to the Bail-in Resolution Instrument made by the Bank and will not be represented or evidenced by any certificate or other instrument of any kind whether in definitive, global or dematerialised form; and  the PROPPs will not be transferable (save by operation of law, e.g., probate, intestacy or similar) or admitted to trading or tradeable on any securities exchange or held in a Central Securities Depositary (a “CSD”), nor does the Bank expect a trading market in the PROPPs to develop. On the conclusion of the bail-in period, the Bank will make and publish a Supplemental Bailin Resolution Instrument 9 . This instrument will specify the allocation ratio of ordinary shares in the resolved Firm in respect of each class of Bail-in Securities (which may be zero) from which it will be possible to determine the entitlement of each class of PROPPs, and the procedure required for PROPP Beneficiaries to effect the transfer of ordinary shares to them. In the event that a PROPP Beneficiary is ineligible to receive or hold ordinary shares in the Firm on exit from resolution, the shares will be sold in transactions either registered, or exempt from registration, under the Securities Act with the net proceeds remitted to the otherwise ineligible PROPP Beneficiary. As noted above, this Letter seeks “no action” relief only in respect of the exchange of Bail-in Securities. A Supplemental Bail-in Resolution Instrument is, like the Bail-In Resolution Instrument, an instrument made by the Bank pursuant to the Banking Act 2009 to exercise its resolution powers to complete the resolution. It takes effect by operation of law by virtue of the Banking Act 2009.

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Securities Act section 3(a)(9), 15 U.S.C. § 77c(a)(9) Analysis As described above, on the conclusion of the bail-in period, the Bank will make and publish a Supplemental Bail-in Resolution Instrument which will specify the allocation ratio of ordinary shares in the resolved Firm for Bail-in Securities (which may be zero) and the procedure required for PROPPs Beneficiaries to receive ordinary shares.
Section 3(a)(9) of the Securities Act exempts “any security exchanged by the issuer with its
existing security holders exclusively where no commission or other remuneration is paid or given directly by or indirectly for soliciting such exchange” from the registration requirements of the Securities Act. 10

We are of the opinion that the exchange of ordinary shares in a resolved Firm with the holders of Bail-in Securities issued by the Firm satisfies the requirements of section 3(a)(9) in circumstances where the exchange is effectuated via the PROPPs mechanism after the conclusion of the bail-in period following the write-down of the Bail-in Securities. In a resolution scenario, Bail-in Securities are written down during the Resolution Weekend in order to provide immediate loss absorption and recapitalization of the failed Firm. It is only after the conclusion of the valuation exercise that the appropriate allocation ratio of ordinary shares in the resolved Firm in respect of each class of Bail-in Securities can be determined. Existing Security Holders As noted above, section 3(a)(9) requires that the exchange must be made by the issuer with its existing security holders. The use of the non-transferrable PROPPs structure as described above ensures that the holders of the Bail-in Securities are the “existing holders” to whom the exchange for ordinary shares is made for purposes of section 3(a)(9) notwithstanding issuance of PROPPs as an interim security between entry of the Firm into resolution and completion of the exchange. 11

Identity of Issuer
In some circumstances, the issuer of the Bail-in Securities of the failed Firm may not be the same legal entity constituting the issuer of the ordinary shares of the resolved Firm. For example, in many UK financial institutions, the group holding company is the issuer of ordinary shares whilst a wholly owned direct or indirect subsidiary is the issuer of Bail-in Securities. The Staff has previously confirmed that it would not recommend enforcement action to the Commission if a parent were to effect an exchange of securities issued by a wholly owned subsidiary that is guaranteed by the parent in reliance on section 3(a)(9). 12 We are of the opinion that the exchange of Bail-in Securities issued by a subsidiary of the Firm for 10 There will be no commission or other remuneration paid in connection with soliciting the exchange. 11 We are of the opinion that the cash-in-lieu mechanism described above does not implicate the availability of the section 3(a)(9) exemption as the receipt of cash by ineligible PROPP Beneficiaries is not an exchange of securities for purposes of section 3(a)(9). 12 See, e.g., The Warnaco Group, Inc. (August 7, 1998) and Echo Bay Mines, Ltd. (May 18, 1998).

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Securities Act section 3(a)(9), 15 U.S.C. § 77c(a)(9) ordinary shares of the group holding company on exit from resolution, in circumstances where the Bail-in Securities have (at, or prior to, resolution) been fully and unconditionally guaranteed by the group holding company of the failed Firm—which is a typical funding structure amongst UK financial institutions—would fall within this prior Staff guidance on the availability of section 3(a)(9). In other circumstances, it may be necessary or desirable to create a new holding company of the failed Firm (in contrast to an extant pre-resolution group holding company as described above), which would itself issue ordinary shares to PROPP Beneficiaries on exit from resolution. The Staff has previously taken a no-action position on the basis of section 3(a)(9) in the context of corporate reorganizations, where the issuer of the exchanged securities reorganizes to create a new holding company the securities of which are thereafter exchangeable for the old securities, provided that the new parent guarantees the outstanding securities of the original issuer. 13 Similarly, in the acquisition context, the exchange of securities by the acquirer for the securities of the acquired company, which are subsequently guaranteed by the acquirer, are eligible for the section 3(a)(9) exemption. 14

We are of the opinion that, provided the new group holding company guarantees the Bail-in Securities (following their applicable write-down) on exit from resolution, the section 3(a)(9) exemption remains available in accordance with the prior Staff guidance. Request for Relief For these reasons, we are of the opinion that the exemption from the registration requirements of the Securities Act in section 3(a)(9) thereof is available for the implementation of the bailin mechanism described above. We respectfully request that the Staff confirm that it will not recommend any enforcement action to the Commission under section 5 of the Securities Act if, in the context of a failed Firm, the Bank directs the exchange of Bail-in Securities in a Firm for ordinary shares (or the net proceeds thereof) in that Firm as part of the exit from resolution without registration under the Securities Act; in the manner described above.

13 See, e.g., Kerr McGee Corporation (July 31, 2001), Nabors Industries, Inc. (April 29, 2002), Weatherford International, Inc. (June 25, 2002) and Duke Energy Corporation (March 30, 2006). In all scenarios, the creation and insertion of the new holding company will be undertaken in transactions which are either registered under, or exempt from the registration requirements of, the Securities Act. 14 See, e.g., Grand Metropolitan Public Limited Company (April 14, 1998), Time Warner, Inc. (November 15,
2000) and B.P. Amoco p.l.c. (March 27, 2001).

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Securities Act section 3(a)(9), 15 U.S.C. § 77c(a)(9) If the Staff disagrees with our analysis, we would appreciate the opportunity to discuss this matter with you. Please do not hesitate to contact us if you have any questions or comments. Yours sincerely, Doug Smith

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