In separate comment letters to the Securities and Exchange Commission - together more than 170 pages - both the American Securitization Forum and The Bond Market Association said that further concessions to the proposed rule changes regarding ABS and MBS reporting are needed.
The two industry groups take different approaches in presenting their cases for changes. While TBMA takes a more issuer-focused approach, the ASF points out securitization's benefits to the consumer and the potential damage to the consumer, should securitization be reined in.
In particular, the ASF asks the SEC to create "[A] more rational and transparent regulatory regime for issuing asset-backed securities. The more efficient the market for those securities," the ASF argues, "the greater the benefits to consumers, businesses and investors, and so to the U.S. economy."
The ASF asks that the SEC "adopt a more flexible and inclusive principles-based definition of the term asset-backed security. It notes that certain of the criteria advanced by the SEC would arbitrarily exclude some structured securities from this definition even though they possess all of the characteristics of ABS."
The ASF recruited 140 individuals from 50 member firms, one-third of the ASF's membership, to contribute in the letter's drafting.
Certain aspects of the proposed rules, especially those on how static pool reporting relates to shelf registration, "need modification and clarification, as there are provisions that may be unduly burdensome, have unforeseen risks and consequences, or that may be unworkable," said TBMA Vice President and Assistant General Counsel Nadine Cancell.
The SEC stipulates that issuers who are found noncompliant in reporting of static pool data would be forced to wait one year before filing a new shelf, even if the violations are corrected or waived.
TBMA argues that static pool reporting should be more general, given pool-by-pool variances. "Because diverse pools are not comparable, disclosure should only be required when the available data is relevant to the pool being securitized," the TBMA said. "Moreover, the rules should only require summary information of pool characteristics at formation, which provides investors with useful data without imposing an enormous administrative burden on the information provider."
The SEC's mandate that the ABS issuer be responsible for pool data is unreasonable, TBMA added. TBMA requests that the involved party in a securitization with the most appropriate pool data be reported, rather than "mandate which party's data is disclosed."
TBMA urges that synthetic and derivative transactions be included within the realm of ABS. "No clear rationale is given for [a synthetic transaction's] exclusion, and market participants need clear guidance to distinguish between what does and does not qualify as an ABS transaction," TBMA argues.
The final request TBMA makes: clarify rules on securitization repackagings. Under the current proposal, repackagings would be ended in the event of an underlying issuer falling out of reporting compliance, or if the issuer's registration expires. "The SEC should outline which provisions of the proposed rules would and would not apply to repackagings, as some of the rules are not applicable to this type of transaction," the group said.
Without tweaking the proposed rules allowing for re-registration, the rules will have a noticeably negative impact on the public term ABS market. "There is a possibility the regulations could substantially reduce the amount of public ABS issuance if adopted as currently written," TBMA sums.
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