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SEC Proposal Prompts Barrage of Responses
Asset Backed Alert, Harrison Scott Publications Inc. (July 16, 2004)
Industry representatives have swamped the SEC with almost three dozen detailed requests for changes and clarifications to its proposed disclosure requirements for securitizations.
The pleas came from individual market players and trade groups, which had until this week to comment on the planned rules. The American Securitization Forum led the charge, submitting a 130-page list of questions and suggestions put forward by 140 asset-backed professionals from more than 50 companies.
Because the securitization forum's letter was compiled with input from participants in all areas of the securitization business, market players are treating the document as the industry's official view. "That should carry some weight with the SEC," said ASF managing staff advisor George Miller, who is also deputy general counsel of the Bond Market Association. The ASF's parent organization submitted a separate letter to the SEC. The commission has indicated that it would like to implement its disclosure rules by yearend. But sources speculate that it may take more time, since they've asked the agency to make major changes that would require it to rewrite many sections of the 400-page proposal. "There's an awful lot for the SEC to read, review and digest. And that's going to take some time," said Nadine Cancell, assistant general counsel at the Bond Market Association.
Most industry professionals claim to favor the proposed disclosure rules. However, many of those who submitted comment letters complained that certain parts of the initiative would unfairly bar some issuers from the market and drive up securitization-related costs more than necessary.
A chief concern is the SEC's plan to make issuers provide investors with substantially more information about the past performance of the credits they securitize - along with data on similar receivables from the same originators. The issuers would also be forced to update that information in quarterly and annual reports filed with the SEC. "In most of these instances, we believe that the proposed requirements go well beyond 'incremental' changes without compelling evidence that the departure from current practice is warranted," the American Securitization Forum wrote.
Among other things, the trade group asked the SEC to apply the proposed reporting requirements only to deals that price more than six months after the rules are implemented. It also wants the SEC to ease a provision that prevents an issuer from using any registered shelf entity for a year if one of its securitization vehicles violates the reporting requirements. Such a penalty is unfair to shops that depend on outside service providers to supply essential information, Cancell said. "It's an extraordinarily harsh penalty . . . There should be some middle ground."
What's more, market players want the SEC to broaden its definition of asset-backed securities to include synthetic transactions.
The SEC has posted all of the comment letters on its Web site, at sec.gov.