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Financial Markets Update

SEC Proposes Substantial New Regulations for Public and Private Offerings of Asset-Backed Securities

On April 7, 2010, at an open meeting of the Securities and Exchange Commission ("SEC"), the SEC unanimously approved for public comment proposed rules that, if adopted, would substantially revise Regulation AB and other rules regarding the offering process, disclosure and reporting for publicly-issued asset-backed securities ("ABS"), and impose new disclosure standards for privately-placed ABS. The SEC’s proposing release – 667 pages in length – has been issued and the comment period will be open for 90 days following its publication in the Federal Register.

The SEC indicates that the proposed changes were prompted by the recent financial crisis, which "highlighted that investors and other participants in the securitization market did not have the necessary tools to be able to fully understand the risk underlying those securities and did not value those securities properly or accurately."

In an effort to enhance investor protection and promote more efficient ABS markets, the SEC concluded that three areas of fundamental change are needed:

  • Enhanced disclosure and reporting for publicly-issued ABS.
  • Better alignment of the interests of issuers and sponsors of ABS with those of investors.
  • Enhanced disclosure and transparency for privately-placed ABS.

In the client alert available through the link below, we provide a brief overview of certain proposed regulations that the SEC believes will advance these objectives.  This overview is based on the remarks of the SEC Commissioners and staff at the open meeting and on the Executive Summary included in the proposing release.

To read more of the client alert, please click here.

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