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Loans Look Like Securities Yet Escape Oversight From SEC

Leveraged loans look and trade like securities -- yet the regulator in charge of overseeing securities doesn’t consider them as such.

These loans, usually made to companies with high debt and speculative-grade credit ratings, are made for commercial or consumer -- not investment -- purposes, according to lawyers and bankers who argue they are not securities. At the same time, the $800 billion leveraged-loan market has become an increasingly popular asset class for pension and mutual funds to invest in.