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BRIEFLY

The SEC criticized a Fed proposal on junk bonds.

December 24, 1985

The Securities and Exchange Commission asked the Federal Reserve Board to either abandon its proposal to restrict the use of junk bonds to finance corporate takeovers or send it back for further study. The SEC said it was concerned that the Fed's proposal would spawn lawsuits, bog down takeovers and could have a variety of unintended economic consequences. The Fed, worried about the explosion of debt that accompanied a spate of takeovers, voted Dec. 6 to apply its rules to takeover attempts that are financed through the sale of high-yield debt securities of greater than usual risk, commonly referred to as junk bonds.

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