On Thursday the Emerging Issues Task Force will discuss whether - or, perhaps, to what extent - CDOs with trading constraints should be eligible for sale treatment under existing Financial Accounting Standard 140, assuming the CDO is not structured as a QSPE.

Most non-Q CDOs are structured with fairly rigorous trading limitations imposed by the rating agencies. Paragraph 9(b) of FAS 140 requires that a transferee in a securitization obtain control over the pledging or exchanging of the transferred assets, and that control cannot be limited for the benefit of the transferor in order for the transaction to qualify for sale treatment.

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