Brooklyn Law Review


Aidan D. Mulry


Following the 2008 financial crisis, Congress implemented a number of reforms aimed at ensuring that such a man-made disaster—fueled by greed and willful ignorance—is not permitted to happen again. On the surface, these reforms appear to be a success; however, under the surface, there is currently a capital market that is effectively ignored, not only by the reforms passed in the wake of the financial crisis, but by virtually all securities regulation. This capital market, which revolves around so-called syndicated loans, is estimated to be larger than the subprime-mortgage collateralized debt obligations market was at its apex, and yet it is unregulated, in large part due to the application of the Reves family resemblance test—the test courts use to determine if something is a security, and thus subject to securities laws. This test is outdated and fails to account for the modern-day syndicated loan market, which has undergone considerable changes in the last decade. In order to ensure that courts are properly classifying securities as securities, this note proposes an updated test for subjecting investment vehicles to securities laws and regulations, which properly takes into account the modern-day realities of the syndicated loan market. This solution will promote increased accountability and diligence in the syndicated loan market, which is necessary to ensure that Congress’s goal of preventing another financial crisis is realized.