SEC Open Meeting, September 19, 2011
|Proposal Date||Comment Deadline||Final Rule Issue|
|September 2011||December 19, 2011||Early 2012|
The U.S. Securities and Exchange Commission (SEC) held a public meeting on September 19, 2011 focused on the prohibition against conflicts of interest in certain securitizations under the Dodd-Frank Wall Street Reform and Consumer Protection Act. The rule proposals concern those who package and sell asset-backed securities (ABS) and prohibits:
- "Securitization participants — underwriters, placement agents, initial purchasers, sponsors, or any of their affiliates or subsidiaries ...
- ... of an ABS — including a synthetic ABS ...
- ... for a designated time period — ending on the date that is one year after the date of the first closing of the sale of the ABS ...
- ... from engaging in certain transactions — including effecting a short sale of the securities offered in the ABS transaction or its underlying assets ...
- ... that would involve or result in any material conflict of interest — with respect to any investor in a transaction arising out of such activity."
Prohibition Against Conflicts Of Interest In Certain Securitizations
- The proposed rule, Section 621 of Dodd-Frank, prohibits participants in asset-backed securities transactions from taking part in certain transactions that would create any material conflict of interest. The rules for determining such conflict of interest in a transaction are also included in the proposal.
Commissioner Luis A. Aguilar, whose statements include:
- An explanation of the responsibilities held by participants in asset-backed securities transactions, and the abuse of power committed by some.
Commissioner Troy A. Paredes, whose statements include:
- Support for the proposal.
- General concerns including the risk of cutting off investors from investment opportunities and constraining the market.
- Specific questions and concerns:
- "If the proposal were adopted, what would the likely impacts be on the securitization market, including investor protection, capital formation, and liquidity? On risk management?
- I am concerned that, as proposed, Rule 127B does not incorporate a role for disclosure. When a transaction or structure is banned, investors may find themselves forced to forego investment opportunities that they might welcome if given the opportunity to make an informed choice.
- New Section 27B of the Securities Act only prohibits material conflicts of interest that arise during a specified covered timeframe."
Chairman Mary L. Schapiro, whose statements include:
- A summary of the proposed rule.
- A reminder that the rule is not intended to interfere with the flow of the markets.
- A mention that the discussion spurred by the proposed rule should be very similar to that following the Volcker Rule's proposal.
- SEC Proposes Rule to Prohibit Conflicts of Interest in Certain Asset-Backed Securities Transactions. SEC. Retrieved on September 19, 2011.
- Commission Speeches and Public Statements. SEC. Retrieved on September 19, 2011.